When firms think at the margin and make incremental adjustments to the level of production, they are naturally led to a level of production where:

Question

Quizplus · Accepted Answer

When firms make decisions at the margin, they adjust their level of production to the point where marginal cost equals marginal revenue, which is the condition for profit maximization. This approach does not necessarily ensure that costs are minimized or that total cost is less than average revenue, nor does it concern the relationship between average variable cost and marginal cost in the context of profit maximization.

When Firms Think at the Margin and Make Incremental Adjustments