A company's marginal cost curve is MC = 10 +20Q
MC is the cost (dollars) of producing the Qth unit of its product and Q is the number of units of its product produced per day. The price of a unit of its product is $8.
A student at a local business school who works for the firm during the summer argues that, on the basis of this evidence , the firm would make more money by shutting down than continuing to operate. Do you agree? explain.© BrainMass Inc. brainmass.com March 21, 2019, 10:07 pm ad1c9bdddf
The student is correct. The more the firm produces, the more money it loses.
Profit is maximized (or, in this case, loss is minimized) when MR = ...
This solution determines whether a firm would do better to shut down production than to continue to operate.