Once the profit-maximizing output where MR = MC is determined, price is set by
A)adding a standard markup percentage to marginal cost.
B)the demand curve.
C)making it equal to MR = MC.
D)subtracting the marginal cost from total revenue.

Question

Quizplus · Accepted Answer

Price is determined by the demand curve because it determines the maximum price that consumers are willing to pay for a given quantity of output. Once the profit-maximizing output is determined where MR = MC, the price can be set at the corresponding point on the demand curve. Choosing A or D would result in a price that may not reflect the demand for the product, and choosing C would simply lead to the same result as finding the profit-maximizing output, without accounting for consumer willingness to pay.

Once the Profit-Maximizing Output Where MR = MC Is Determined