Profit maximization occurs when
A) a firm expands output until marginal revenue is exceeded by marginal cost.
B) a firm expands output until marginal revenue is equal to marginal cost.
C) the price in the market is equal to the firm's marginal revenue.
D) total costs equal total revenue.
E) a firm sets the price at a point above average total cost.

Question

Quizplus · Accepted Answer

Profit maximization occurs when a firm expands output until marginal revenue is equal to marginal cost. At this point, the firm is producing the optimal level of output where the additional revenue earned from producing one more unit is equal to the additional cost incurred. This ensures that profits are maximized as any further production would result in lower profits due to higher costs.

Profit Maximization Occurs When