A firm seeking to maximize economic profits should produce at the output at which

Question

Quizplus · Accepted Answer

The output level at which marginal revenue equals marginal cost is where the firm maximizes its economic profits. At this point, the additional revenue earned from producing one extra unit is equal to the additional cost incurred to produce that unit, meaning that the firm is no longer experiencing increasing or decreasing returns. Producing more units beyond this point would result in diminishing returns and decreasing profits, while producing fewer units would leave potential profits on the table. Therefore, the firm maximizes its profits by producing the quantity where MR = MC.

A Firm Seeking to Maximize Economic Profits Should Produce at the Output