Which of the following statements is true a. A firm should increase quantity as long as price is greater than marginal cost. b. A firm should increase quantity as long as marginal revenue is greater than marginal cost c. A firm should increase quantity as long as average cost is greater than price d. A firm should increase quantity as long as price is higher than average cost, regardless of the marginal cost

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jtbennett277 jtbennett277

20-02-2020
Business

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Which of the following statements is true a. A firm should increase quantity as long as price is greater than marginal cost. b. A firm should increase quantity as long as marginal revenue is greater than marginal cost c. A firm should increase quantity as long as average cost is greater than price d. A firm should increase quantity as long as price is higher than average cost, regardless of the marginal cost

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jepessoa jepessoa · Answer 1 · 2020-02-21T05:15:19+01:00

Answer:

B) A firm should increase quantity as long as marginal revenue is greater than marginal cost

Explanation:

A firm maximizes its accounting profit when the marginal revenue = marginal costs.

Many times we believe that the price of a product is equal to the marginal revenue, but that is not correct due to distortions produced by taxes or other fees (e.g. credit or debit card fees).

Marginal revenue = selling price - taxes or fees