CFA Practice Question
Refer to the graph below. If the firm produces 700 units of output per day, it ______
B. can increase profit by producing less.
C. will be maximizing profit.
A. can increase profit by producing more.
B. can increase profit by producing less.
C. will be maximizing profit.
Correct Answer: B
Since marginal cost exceeds marginal revenue at this output level, profits can be increased by producing less.
User Contributed Comments 3
| User | Comment |
|---|---|
| azramirza | isnt since MC is greater then demand the firm needs to produce more rather than less? or reduce to 600 where mc=mr. right? |
| southeuro | reduce to where mc=mr then draw vertical line to demand to find the price that maximises. |
| maryprz14 | beautiful question, I hope actual test's difficulty level be the same!!! :/ |