2. A Firm is facing a downward sloping price line (AR curve). Why should it produce more when it must lead to fall in price of the commodity?
Dear Student
A firm produces more of a commodity even when price is reducing only in a situation when it finds that the difference between TR and TC is increasing, so that its total profit (TR - TC) is rising, It will stop production when profit is maximum or when the difference between TR and TC is maximum.
Regards
A firm produces more of a commodity even when price is reducing only in a situation when it finds that the difference between TR and TC is increasing, so that its total profit (TR - TC) is rising, It will stop production when profit is maximum or when the difference between TR and TC is maximum.
Regards