In order to maximize profits,a firm should produce at the output level for which
A)average cost is minimized.
B)marginal revenue equals marginal cost.
C)marginal cost is minimized.
D)price minus average cost is as large as possible.

Question

Quizplus · Accepted Answer

Maximizing profits requires producing at the output level where marginal revenue (MR) equals marginal cost (MC). This is because at this point, the firm is producing the exact quantity of goods that consumers are willing to pay for, and producing more or less will lead to a decrease in profits. Therefore, choice B is the best option as it satisfies this condition. Choices A and C are incorrect as they focus on minimizing cost rather than maximizing profits, and choice D is incorrect as it does not consider the relationship between MR and MC.

In Order to Maximize Profits,a Firm Should Produce at the Output