Question

When the price is greater than the marginal cost for a firm in a competitive market,

a. the marginal cost must be falling.
b. the firm must be minimizing its losses.
c. there are opportunities to increase profit by increasing production. d. the firm should decrease output to maximize profit.

Answer 1

Answer: there are opportunities to increase profit by increasing production.

Explanation: one of the main purpose of doing business is to maximize profits.

When the price of a good is higher than the marginal cost (cost associated with producing one more unit) the business should increase production in order to maximize profits. This is really effective in a competitive market as competitors will look for ways to make their products sell too.