If a firm is earning a profit and is operating at the output

If a firm is earning a profit and is operating at the output level where its marginal revenue exceeds its marginal cost by the greatest amount, the firm:

Solution

If any firm is earning a profit and is operating at the output level where its marginal revenue exceeds its marginal cost by the greatest amount, the firm could increase its profit by increasing its output level. Hence the correct answer is (B). The output level can be increased till the level where MR=MC because that is the point where profits are maximized.