A producer can raise profit by expanding output it Select on

A producer can raise profit by expanding output it: Select one: marginal revenue is equal to marginal cost. marginal revenue is less than marginal cost. marginal cost is negative. marginal revenue is negative. marginal revenue is greater than marginal cost.

Solution

Profit is the excess of total revenue (TR) over total cost (TC). Total revenue is total sale proceeds. It is estimated by multiplying price and quantity sold. Suppose you want to increase total profit by manufacturing and selling one extra units. It is possible if extra revenue earned from this unit is more than extra cost of maufacturing it. Here extra revenue of the last unit sold is known as marginal revenue (MR). Similarly extra cost of manufacturing last unit sold is marginal cost (MC). Suppose the firm will get $10 from one extra unit sold. It is MR. If extra cost of manufacturing this unit is $6, then profit will go up by $10-$6=$4. Thus profit will increase only when MR is greater than MC. If these two are equal, then firm has maximized its total profit. Further quatity sold will not add to its profit.

Answer: Option e of the problem is correct. A producer can raise profit by expanding output if marginal revenue is greater than marginal cost.

Hence