When producing a piece of luggage, the marginal cost is $92 and the marginal revenue is $81. What is the best action for the firm?
Correct Answer: D
According toGlobal Economics for Managers, whenmarginal cost exceeds marginal revenue, firms should decrease production, making option D correct. In this case, MC = $92 and MR = $81. Producing an additional unit would reduce profit because the cost of production exceeds the revenue gained. Reducing output moves the firm closer to the profit-maximizing condition where MR equals MC. Options A, B, and C would worsen losses or ignore marginal decision-making principles. Therefore, option D is the correct managerial response.
