Comparing marginal revenue to marginal cost (i)
Reveals the contribution of the last unit of production to total profit.
(ii)
Is helpful in making profit-maximizing production decisions.
(iii)
Tells a firm whether its fixed costs are too high.

Question

Quizplus · Accepted Answer

Comparing marginal revenue to marginal cost is helpful in making profit-maximizing production decisions because it allows the firm to determine whether they should continue producing at the current level or adjust production. It also reveals the contribution of the last unit of production to total profit. Therefore, both (i) and (ii) are correct. However, it does not tell the firm whether its fixed costs are too high, making (iii) incorrect.

Comparing Marginal Revenue to Marginal Cost (I)