Question

(Table 8.2)

Firm A

Firm B

Quantity	TR	MC		Quantity	TR	MC
99	495	7		99	1,683	12.25
100	500	8		100	1,700	13.05
101	505	9		101	1,717	13.95

Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce _____ output and firm B should produce _____ output.

correct answer- less; more

please explain the steps to getting the answer, thanks

Answer 1

Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce less output and firm B should produce more output.

	Firm A				Firm B
Quantity	TR	MC	MR	Quantity	TR	MC	MR
99	495	7		99	1,683	12.3
100	500	8	5	100	1,700	13.1	17
101	505	9	5	101	1,717	14	17

MR=Change in TR/Change in Quantity

For-profit maximization MC=MR

For Firm A at 100 units of output MR<MC so output needs to be reduced

For Firms B at 100 units of output MR>MC so output needs to be increased.