All firms,no matter the type of firm structure in which they are producing,make their production decisions based on the point where their:
A) total revenue equals total cost.
B) marginal revenue equals marginal costs.
C) profits are equal to zero.
D) marginal revenue equals price.
E) average total cost is minimized.

Question

Quizplus · Accepted Answer

Firms make production decisions based on where their marginal revenue (MR) equals marginal cost (MC) because this is the point where they can maximize profits. At this point, each unit produced adds more to revenue than it does to cost, so the firm is producing efficiently. Therefore, choice B, where marginal revenue equals marginal costs, is the best choice for this question.

All Firms,no Matter the Type of Firm Structure in Which