Question: You've been hired as a management consultant to four different companies in competitive industries. They're each trying to figure out if they should produce a little more output or a little bit less in order to maximize their profits. The firms all have typical marginal cost curves: They rise as the firm produces more. Your staff did all the hard work for you of figuring out the price of each firm's output and the marginal cost of producing one more unit of output at their current level of output. However, they forgot to collect data on how much each firm is actually producing at the moment. Fortunately, that doesn't matter. In your final report, you need to decide which firms should produce more output, which should produce less, and which are producing just the right amount:
a. WaffleCo, maker of generic-brand frozen waffles. Price = $4 per box, marginal cost = $2 per box.
b. Rio Blanco, producer of copper. Price = $32 per ounce, marginal cost = $45 per ounce.
c. GoDaddy.com, domain name registry. Price = $5 per Web site, marginal cost = $2 per Web site.
d. Luke's Lawn Service. Price: $80 per month, marginal cost = $120 per month.