A perfect forecast of demand allows a profit- maximizing manager to produce where _______marginal revenue is _______the marginal cost.

Question

Quizplus · Accepted Answer

A perfect forecast of demand means that the manager knows exactly how much to produce to meet the demand. Therefore, the actual marginal revenue (the additional revenue generated from producing one additional unit) is equal to the marginal cost (the additional cost incurred from producing one additional unit) at the profit-maximizing production level. Choice A and D are incorrect because they suggest that the manager produces more than what is actually demanded, which would not maximize profits. Choice B is incorrect because expected demand may not always match actual demand, and producing based on expected demand rather than actual demand would not lead to profit maximization.

A Perfect Forecast of Demand Allows a Profit- Maximizing Manager