# Here's an Econ question, I'm deeply confused

If a profit-maximizing firm finds that it’s marginal revenue exceeds its marginal cost, the firm should: (A) increase output no matter whether the firm is a price taker or a price searcher (B) decrease output no matter whether the firm is a price taker or a price searcher © increase output if the firm is a price taker but not necessarily if the firm is a price searcher (D) increase output if the firm is a price searcher but not necessarily if the firm is a price taker I selected ©, but the correct answer is another, I’m really confused.

should be B

(A) increase output no matter whether the firm is a price taker or a price searcher the only exception i can think of is a monopoly, but it is not an exception - they produce at the point where MR=MC, charging the price on the demand curve

supersharpshooter Wrote: ------------------------------------------------------- > (A) increase output no matter whether the firm is > a price taker or a price searcher > > the only exception i can think of is a monopoly, > but it is not an exception - they produce at the > point where MR=MC, charging the price on the > demand curve Increase output= increase costs…yes it is correct… I got confused between output and input LOL

Profit is maximized for both price takers and price searchers where marginal cost equal marginal revenue. I’ll go with A.

like map1 said, long story short, by not producing at MR=MC, you are not maximizing profits

strangedays, can you explain why? Please!!! You’re a genius.

Although answering A would assume that the monopolist is unable to price discriminate, no?

D

I’m surprised that no one choose ©, but (B) is correct

C was my first inclincation actually.

I am kind of surprised/confused by the correct answer being (B). A price taker would miss on opportunities when output is reduced.

Why don’t you increase output until MR=MC?

A monopolist can apply price discrimination at any level of output.

I believed that MR=MC, so we should increase output but the key is “profit-maxizing”

ok, now I see it!

Where in the question does it say that MR=MC?

map1, can you explain how you see it?

Dreary Wrote: ------------------------------------------------------- > Where in the question does it say that MR=MC? it doesn’t – you infer from the stmtm “profit maxing”

For a price taker, increasing output increases expenses. For the same zero economic profit, here you go with a lot more trouble (inventory, labor, rent, you name it, you need it to increase output). For a price searcher, he already makes an economic profit, reducing output can only drive up prices, it could generate increased revenues even at lower levels of output. Remember that at previous lower outputs, the marginal revenue was larger. Both would become efficient when MR=MC, but that’s not maximizing profits for either one of them.