If the marginal revenue is greater than the marginal cost at a certain level of production, then the firm should respond by: a. Decreasing production. b. Firing workers. c. Increasing production. d. Exiting the market.

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Profit Maximization

Economic activity is related to the use of scarce resources of the economy that are used for producing goods and services which are required to satisfy various demands of the people. In other words, it can be said that it is all about satisfying the unlimited demands of individuals with the limited resources available. The production decision is taken by the producers or the firms. In economics, the terms ‘producers’, ‘suppliers’, and ‘firms’ are interchangeable. Now the question arises, what does a firm actually mean?