A firm maximises profit when it produces output up to the point where marginal cost equals marginal revenue.

Question

Quizplus · Accepted Answer

This statement is correct according to the basic principles of microeconomics. Marginal cost represents the additional cost of producing one more unit of output, while marginal revenue represents the additional revenue generated by selling one more unit of output. To maximize profit, a firm should produce up to the point where marginal cost equals marginal revenue, as at this point the additional revenue generated by selling one more unit equals the additional cost incurred in producing it, thus maximizing profit.

A Firm Maximises Profit When It Produces Output Up to the Point