Which of the following is (are) true?
A) Profit-maximizing behavior is based on the marginal decision rule.
B) Additional units of a good should be produced as long as MR MC.
C) The profit-maximizing solution occurs where MR = MC.
D) All of the above are true.

Question

Which of the following is (are) true?
A) Profit-maximizing behavior is based on the marginal decision rule.
B) Additional units of a good should be produced as long as MR > MC.
C) The profit-maximizing solution occurs where MR = MC.
D) All of the above are true.

Quizplus · Accepted Answer

All of the statements are true. The marginal decision rule states that a decision-maker should continue to engage in an activity as long as the marginal benefit exceeds the marginal cost. For a firm, this means producing additional units of a good as long as the marginal revenue (MR) generated by those units is higher than the marginal cost (MC) of producing them. The profit-maximizing solution occurs where MR = MC, which is where the additional revenue earned from producing one more unit is exactly equal to the additional cost of producing that unit.

Which of the Following Is (Are) True