If total profit is maximized, then marginal cost must equal marginal revenue.

Question

Quizplus · Accepted Answer

When marginal cost equals marginal revenue, the firm is producing at the level of output where it is earning the highest possible profit. Any further increase in production would increase costs more than the additional revenue earned, thus decreasing total profit. Any decrease in production would cause revenue lost to be greater than the cost savings, also decreasing profit. Therefore, at the profit-maximizing level of output, marginal cost must equal marginal revenue.

If Total Profit Is Maximized, Then Marginal Cost Must Equal