A profit-maximizing firm will produce at the level where:
A) marginal cost equals average revenue.
B) the per unit cost is minimized.
C) price equals average fixed cost.
D) marginal revenue equals marginal cost.
E) price equals average cost.

Question

Quizplus · Accepted Answer

A profit-maximizing firm aims to produce where its marginal revenue equals its marginal cost. This is because at this output level, the firm's revenue from selling an additional unit is exactly equal to the cost of producing that unit. Any further increase in production would lead to a decrease in profit, as the cost of producing an additional unit would exceed the revenue earned from selling that unit. Therefore, choice D is the best option.

A Profit-Maximizing Firm Will Produce at the Level Where