You're thinking of buying one of two firms. One has a profit margin of $4 per unit; the other has a profit margin of $10 per unit. Which should you buy? Why?
If both firms are producing where MR = MC and you could buy either for the same amount, then you should buy the firm:
A. that has a profit margin of $4 per unit because it must be producing more and is therefore earning the higher total profits.
B. that has a profit margin of $10 per unit because it must be producing more and is therefore earning the higher total profits.
C. there is not enough information to determine which firm to buy.
D. The one with the highest total profit should be bought.
E. that has a profit margin of $10 per unit.
A higher profit margin means that you could increase output and further increase total profits.
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