Practice question · Select all that apply
Profit is currently at an output where . Which statements are true?
Hints
- Marginal cost above marginal revenue means the last units destroy value.
- Being past the optimum is not the same as making a loss overall.
Show the answer
- A. Cutting output raises profit
- C. The firm has overshot the optimal quantity
- D. The last units produced are destroying value
Why
means overshoot: trim back toward the crossing. But totals can remain healthy well past the peak, being past the optimum and being unprofitable are different diseases.
Practise Optimization in Economics
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