Question

Explain why a firm might want to continue operating and producing goods even after diminishing marginal returns have set in and marginal cost is rising.

Answer 1

A firm might want to continue operating and producing goods even after diminishing marginal returns have set in and marginal cost is rising, as increasing production could ensure that there is increase in total profit, when marginal benefit of producing is greater than the rising marginal cost.
There might also be a scenario , when the producer speculates that demand might go up in future when a new product is produced as opposed to consumers not buying previous goods, which is why there was diminishing marginal returns.