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Firm's Output Decision Based on Marginal Profit
A firm's decision to adjust its production level is guided by marginal profit. If producing an additional unit adds more to revenue than to cost (MR > MC), the marginal profit is positive, and the firm will increase output to raise its total profit. Conversely, if the additional unit costs more to produce than the revenue it generates (MR < MC), the marginal profit is negative, and the firm will decrease its output. Therefore, a firm like Beautiful Cars would not produce fewer than 32 units, as profit could still be increased, nor would it produce more than 32 units, as profit would diminish.
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Introduction to Microeconomics Course
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Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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Firm's Output Decision Based on Marginal Profit
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A company manufactures custom bicycles and is currently producing 100 bikes per month. For the 101st bike, the company calculates that the additional revenue it would earn is $500, and the additional cost to produce it (for materials, labor, etc.) would be $550. Based on this information for the 101st unit, what is the most logical immediate step for the company to take to maximize its total profit?
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