When the marginal-cost curve lies below the


1. Assume that for a perfectly competitive firm marginal revenue equals rising marginal cost at 100 units of output. At this output level, the firm's total fixed cost is $600 and its total variable cost is $400. If the price of the product is $10 per unit, the firm should produce

a. zero units of output.

b. less than 100 units of output.

c. 100 units of output.

d. more than 100 units of output.

e. Cannot be determined from the information given.

2. When the marginal-cost curve lies below the marginal-revenue curve

a. the firm cannot improve its profit since revenue is already greater than cost.

b. marginal revenue is greater than marginal cost, and the firm should therefore increase production to increase profits.

c. marginal revenue is greater than marginal cost, and the firm should therefore decrease production to increase profits.

d. marginal revenue is less than marginal cost, and the firm should therefore decrease production to increase profits.

e. it is not possible for this firm to increase profits since it is failing to operate at an efficient point.

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Business Economics: When the marginal-cost curve lies below the
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