Profit maximization occurs when:
A) TR TC.
B) MR = MC.
C) MC = AC.
D) P = AC.

Question

Profit maximization occurs when:
A) TR > TC.
B) MR = MC.
C) MC = AC.
D) P = AC.

Quizplus · Accepted Answer

Profit maximization occurs when marginal revenue (MR) equals marginal cost (MC). This is because at this point, the firm is producing the optimal level of output where the additional revenue from producing one more unit (MR) is equal to the additional cost of producing one more unit (MC). At any other level of output, the firm could increase profits by either producing more or producing less. Therefore, the correct answer is B, where MR=MC.

Profit Maximization Occurs When