A consultant has advised Consolidated Fish,Inc. ,a perfectly competitive firm,that it should cut back its production in order to increase its profits.We can conclude from this that

A) CF's total costs must be greater than its total revenues.
B) CF's marginal cost must be greater than the price of its product.
C) fixed costs are not being covered and CF should shut down.
D) CF's costs are increasing at a rate less than its revenues.

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Kylie Cross · Accepted Answer

Final Answer : B, Explanation :  A perfectly competitive firm will produce at the point where its marginal cost equals the market price of its product. The consultant advised CF to cut back on production, which means that CF's marginal cost must be greater than the price of its product. This indicates that CF is producing at a point where it is incurring losses and reducing production will increase profits.  Options A, C, and D are not relevant to the given scenario.

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