If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

Question

Quizplus · Accepted Answer

By producing where marginal revenue equals marginal cost, the firm maximizes its profit. If the price is above average variable cost, the firm covers its variable costs and contributes to fixed costs, ensuring the largest possible profit given the circumstances.

If the Price Exceeds the Average Variable Cost, by Producing