Asked by Michael Kumlien on Jul 13, 2024
Verified
Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?
Profit-Maximizing
The process or strategy of adjusting production and sales to achieve the highest possible profit under given market conditions.
Level Of Production
The total quantity of goods or services produced by a company or an economy during a specific period.
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity can dictate prices.
- Compute the financial gains or deficits experienced by businesses operating in competitive environments.
- Clarify the differences between average returns, marginal returns, and their implications for profit-driven organizations.
Verified Answer
FF
faker fakercdeJul 16, 2024
Final Answer :
The firm selects the level of output at which marginal revenue is equal to marginal cost. If MR > MC, profit will increase if the firm increases Q. If MR < MC, profit will increase if the firm decreases Q.
Learning Objectives
- Compute the financial gains or deficits experienced by businesses operating in competitive environments.
- Clarify the differences between average returns, marginal returns, and their implications for profit-driven organizations.