Profit is maximized at the output at which marginal revenue equals marginal cost.

Question

Quizplus · Accepted Answer

This is the fundamental principle of profit maximization in economics. At the output level where marginal revenue (the additional revenue from producing one more unit) equals marginal cost (the additional cost of producing one more unit), the firm is producing the optimal quantity that maximizes profits. If the firm produces more than this quantity, then the marginal cost will exceed the marginal revenue, resulting in lower profits. If the firm produces less than this quantity, then the marginal revenue will exceed the marginal cost, again resulting in lower profits.

Profit Is Maximized at the Output at Which Marginal Revenue