Microeconomics

 

Microeconomics

 

DISCUSSION QUESTION PART 1: Explain, in your own words, why profit maximization happens at the point where MR = MC, and not where MR is greater than MC. Refer to Figure 7.2. in the textbook. Should the 4th unit of output be sold? What about the 5th unit, 6th unit, 7th unit, 8th unit, 9th, or 10th unit? Use your understanding of MR = MC rule to explain.
DISCUSSION QUESTION PART 2: If you are the manager of a perfectly competitive firm that is making a loss (TR < TC), would you decide to shut it down? Under what circumstances would you decide to operate an unprofitable business?

 

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