To maximize profits a firm tends to produce an output level at which its marginal revenue equals its marginal costs.

Question

Quizplus · Accepted Answer

This statement is true based on the basic principle of profit maximization in microeconomics. A firm tries to produce at a quantity where the marginal revenue earned from the sale of one additional unit of output is equal to the marginal cost of producing that unit. At this point, the firm's profits are maximized, and any further increase or decrease in production will lead to a decline in profits.

To Maximize Profits a Firm Tends to Produce an Output