Which of the following scenarios depicts a seller who is following the rational rule for sellers?

• A. A seller increases production as long as the marginal revenue is greater than or equal to the marginal cost.
• B. A seller decreases production whenever total revenue is positive.
• C. A seller produces at the level where average cost is minimized, regardless of marginal revenue.
• D. A seller stops producing as soon as fixed costs are covered.

Answer: (A)

Verified step by step guidance

1. Understand the rational rule for sellers: A seller maximizes profit by producing the quantity where marginal revenue (MR) equals marginal cost (MC), or continues to increase production as long as MR is greater than or equal to MC.
2. Analyze each scenario by comparing it to the rational rule: Check if the seller's decision to increase, decrease, or stop production aligns with the relationship between marginal revenue and marginal cost.
3. For the first scenario, note that increasing production as long as MR \geq MC matches the profit-maximizing condition, since producing more adds to profit when MR exceeds or equals MC.
4. For the other scenarios, recognize why they do not follow the rational rule: decreasing production when total revenue is positive ignores marginal cost, producing where average cost is minimized ignores marginal revenue, and stopping after fixed costs are covered ignores marginal analysis.
5. Conclude that the scenario where the seller increases production as long as MR \geq MC correctly depicts the rational rule for sellers.