Any firm,competitive or not,desiring to maximize profits,will choose its quantity according to the rule,produce that quantity at which
A) marginal revenue = price.
B) marginal revenue = marginal cost.
C) average variable cost is at its minimum.
D) marginal cost is at its minimum.

Question

Quizplus · Accepted Answer

In order to maximize profits, a firm should produce at the quantity where marginal revenue is equal to marginal cost. This is because if marginal revenue is greater than marginal cost, the firm can increase profits by producing more, and if marginal revenue is less than marginal cost, the firm can increase profits by producing less. Therefore, the best choice is B, where marginal revenue equals marginal cost.

Any Firm,competitive or Not,desiring to Maximize Profits,will Choose Its Quantity