If a firms marginal revenue is greater than its marginal cos

If a firm\'s marginal revenue is greater than its marginal cost, then: Select one: a. the firm is maximizing profit. b. more output will add more to revenue than to cost. c. each added unit of output will reduce profits. d. less output will add more to revenue than to cost. e. more output will add more to cost than to revenue.

Solution

B. More output will add more to revenue than to cost.

Firm should operate at Marginal revenue = marginal cost to maximise its profit. When MR>MC, it means the firm can still increase its production because revenue generated from additional unit is greater than the cost incurred in producing the additional unit. Hence More output wil add more to revenue than to cost.