Suppose that a firm in a perfectly competitive industry finds that at its current output rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. Furthermore, the firm is producing an output rate at which marginal cost is less than the average total cost at that rate of output.
Part 2
Is the firm maximizing its economic profits?
A.
Yes, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output.
B.
No, if the firm was maximizing its economic profits the marginal cost would not be less than the average total cost at that rate of output.
C.
No, the firm is producing where average total cost are a minimum.
D.
It is impossible to draw a conclusion from the given information.
E.
No, the marginal cost is less than the average cost, so the average cost must be declining at the output level where the firm is producing.
1 answer
B. No, if the firm was maximizing its economic profits, the marginal cost would not be less than the average total cost at that rate of output.
0 answers