Practically, a business does not set prices and output by equating marginal cost to marginal revenue because it finds that it can make more profits by setting a high markup on its product.

Question

Quizplus · Accepted Answer

While the principle of equating marginal cost (MC) to marginal revenue (MR) is a fundamental economic theory for profit maximization, businesses may not always follow it strictly due to practical considerations such as market demand, competition, and product differentiation, but it does not imply they can make more profits by simply setting a high markup without considering these factors.

Practically, a Business Does Not Set Prices and Output by Equating