If a firm has zero marginal costs, then its maximum-profit output is where marginal revenue is zero.

Question

Quizplus · Accepted Answer

If a firm has zero marginal costs, then its profit-maximizing output is where marginal revenue equals zero. This is because, with zero marginal costs, any revenue generated from selling additional units of output is pure profit, and the firm would want to continue producing until they no longer generate any additional revenue from selling an additional unit of output (i.e., when marginal revenue is zero).

If a Firm Has Zero Marginal Costs, Then Its Maximum-Profit