To maximize its profit or minimize its loss by producing, a firm should operate where:
A) total revenue equals total cost.
B) marginal revenue equals marginal cost.
C) marginal revenue exceeds marginal cost by the greatest amount.
D) marginal cost exceeds marginal revenue by the smallest amount.

Question

Quizplus · Accepted Answer

The principle of profit maximization for firms in competitive markets is to produce at the level where marginal revenue (MR) equals marginal cost (MC). This is because producing one more unit of a good or service will add equally to the cost of production and revenue, ensuring no additional profit can be made by increasing or decreasing production.

To Maximize Its Profit or Minimize Its Loss by Producing