Comparison of marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit.
(ii) is helpful in making profit-maximizing production decisions.
(iii) tells a firm whether its fixed costs are too high.

Question

Comparison of marginal revenue to marginal cost (i)	reveals the contribution of the last unit of production to total profit.
(ii)	is helpful in making profit-maximizing production decisions.
(iii)	tells a firm whether its fixed costs are too high.

Quizplus · Accepted Answer

Marginal revenue and marginal cost comparison is useful in both determining the contribution of the last unit of production to total profit (statement i) and in making profit-maximizing production decisions (statement ii). It does not, however, provide any information about fixed costs being too high (statement iii).

Comparison of Marginal Revenue to Marginal Cost (I) Reveals the Contribution