A firm sets its output where
A)marginal profit minus marginal cost equals zero (Mπ - MC = 0).
B)marginal revenue minus marginal profit equals zero (MR - Mπ = 0).
C)marginal revenue minus marginal cost equals zero (MR - MC = 0).
D)marginal revenue minus marginal cost is greater than zero (MR - MC 0).

Question

A firm sets its output where
A)marginal profit minus marginal cost equals zero (Mπ - MC = 0).
B)marginal revenue minus marginal profit equals zero (MR - Mπ = 0).
C)marginal revenue minus marginal cost equals zero (MR - MC = 0).
D)marginal revenue minus marginal cost is greater than zero (MR - MC > 0).

Quizplus · Accepted Answer

When marginal revenue equals marginal cost, the firm is producing at the point where it maximizes profits. At this point, the firm's profits are not increasing or decreasing, indicating that it is producing the optimal amount of output to maximize profits. Therefore, the best choice is C, where MR - MC = 0.

A Firm Sets Its Output Where