If a firm equates MR and MC, then:
A) TR is at a maximum, and TC is at a minimum.
B) output is at a maximum.
C) losses are at a maximum.
D) profits are at a maximum or losses are at a minimum.
E) both TR and TC are at a maximum.

Question

Quizplus · Accepted Answer

When a firm equates marginal revenue (MR) and marginal cost (MC), it achieves the profit-maximizing level of output where profits are at a maximum or losses are at a minimum. This is because at the point of MR=MC, the additional revenue gained from producing one more unit of output is just equal to the additional cost incurred in producing that unit. Therefore, the firm has no incentive to either increase or decrease production, as any changes would result in lower profits or higher losses. This point is known as the profit-maximizing level of output.

If a Firm Equates MR and MC, Then