A profit-maximizing firm always
A)sells its output at P = MR.
B)produces at the output at which MR = 0.
C)hires labor until the MRP of labor = 0.
D)produces every unit of output for which MR MC.

Question

A profit-maximizing firm always
A)sells its output at P = MR.
B)produces at the output at which MR = 0.
C)hires labor until the MRP of labor = 0.
D)produces every unit of output for which MR > MC.

Quizplus · Accepted Answer

A profit-maximizing firm produces every unit of output for which MR > MC because producing additional units beyond this point would result in a decrease in profit. This is known as the profit maximization rule, and it ensures that the firm is producing the optimal quantity of output to maximize its profits. Choices A, B, and C are not always true for a profit-maximizing firm, as they depend on the specific market conditions and production function of the firm.

A Profit-Maximizing Firm Always