The concept that describes the firm's solution to profit maximization is
A) Marginal cost equals marginal revenue.
B) Maximize marginal revenue.
C) Minimize cost.
D) Marginal revenue equals fixed costs.

Question

Quizplus · Accepted Answer

Marginal cost equals marginal revenue is the principle that firms use to determine the level of output that maximizes profit. When the cost of producing one more unit (marginal cost) is exactly equal to the revenue gained from selling that unit (marginal revenue), profit is maximized because producing more would increase costs more than revenue, and producing less would forgo potential profit.

The Concept That Describes the Firm's Solution to Profit Maximization