Assuming price is greater than average variable cost in the short-run and that at higher output levels marginal revenue is less that marginal cost, the firm will maximize profit if:

Question

Quizplus · Accepted Answer

In order to maximize profits, a firm should produce where marginal revenue is equal to marginal cost. This is because at this level of output, the firm is able to sell the last unit produced for the same price as it costs to produce that unit, meaning that the firm earns the most profit possible.

Assuming Price Is Greater Than Average Variable Cost in the Short-Run