If a firm is maximizing profit, it produces at the point where
A) MR MC
B) MR = MC
C) TR TC
D) TR = TC

Question

If a firm is maximizing profit, it produces at the point where
A) MR > MC
B) MR = MC
C) TR > TC
D) TR = TC

Quizplus · Accepted Answer

In order to maximize profit, a firm should produce at the point where MR (marginal revenue) = MC (marginal cost). At this point, the firm is generating the highest level of profit possible because it is producing the quantity of goods where the incremental revenue from each additional unit sold (MR) is equal to the incremental cost of producing that unit (MC). Selecting any other point would result in lower profits for the firm.

If a Firm Is Maximizing Profit, It Produces at the Point