Question

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its
a. marginal revenue is lower than it was previously.
b. marginal cost is lower than it was previously.
c. quantity of output is higher than it was previously
d. All of the above are correct.

Answer 1

Answer:

a. marginal revenue is lower than it was previously.

Explanation:

• According to the Law of Supply states, when the price of a product or service increases, all other factors are equal, the quantity of products or services offered by the suppliers increases, and vice versa.

• In other words, if a good price goes up, suppliers will try to increase their profits by offering more goods.

• so  correct option is a. marginal revenue is lower than it was previously.