In a resource allocation problem, if the marginal cost of production exceeds the

In a resource allocation problem, if the marginal cost of production exceeds the marginal benefit, what should a firm do? (2023)

In a resource allocation problem, if the marginal cost of production exceeds the marginal benefit, what should a firm do? (2023)

Step 1: Understand what marginal cost means. It is the cost of producing one more unit of a product.
Step 2: Understand what marginal benefit means. It is the additional benefit or revenue gained from selling one more unit of a product.
Step 3: Compare the marginal cost and marginal benefit. If the marginal cost is higher than the marginal benefit, it means producing more units is not profitable.
Step 4: Decide to reduce production. Since producing more units leads to losses, the firm should cut back on production.
Step 5: Monitor the production levels to ensure that the marginal cost is lower than or equal to the marginal benefit in the future.

No concepts available.