The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the
A) output-maximizing rule.
B) profit-maximizing rule.
C) shut-down rule.
D) break-even rule.

Question

Quizplus · Accepted Answer

The profit-maximizing rule states that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it. This allows the firm to earn the highest possible profit. The other options (output-maximizing rule, shut-down rule, break-even rule) do not take into account the goal of maximizing profits.

The Principle That a Firm Should Produce Up to the Point