The level of an economic activity should be increased to the point where the ____.
A)Marginal cost=0
B)Marginal revenue=0
C)Total revenue = Total cost
D)Marginal revenue - marginal cost=0

Question

​The level of an economic activity should be increased to the point where the ____.
A)​Marginal cost=0
B)Marginal revenue=0
C)Total revenue = Total cost
D)​Marginal revenue - marginal cost=0

Quizplus · Accepted Answer

The level of economic activity should be increased to the point where the marginal revenue (MR) equals the marginal cost (MC), or where MR - MC = 0. This is because at this point, the firm is producing the optimal quantity of output where the marginal benefit equals the marginal cost, and therefore maximizing profits. Options A and C are incorrect because they do not take into account the concept of marginal analysis. Option B is incorrect because if marginal revenue were equal to zero, it means that additional units of output are not generating any further revenue, which is not a economically optimal situation.

​The Level of an Economic Activity Should Be Increased to the Point

The Level of an Economic Activity Should Be Increased to the Point