Irving R.Associates is granted a patent for a new product for which there are no close substitutes.Which of the following conditions must be true at the profit-maximizing output produced by this firm?
A)Price is equal to marginal cost.
B)Average cost is less than marginal cost.
C)Marginal revenue is equal to marginal cost.
D)Marginal revenue is less than average variable cost.
E)Price is greater than average revenue.

Question

Quizplus · Accepted Answer

At the profit-maximizing output, the firm must produce where marginal revenue is equal to marginal cost. This is because producing any more or any less would result in lower profits. A and B are not necessarily true for all firms, and D and E are not related to profit-maximization at the output level.

Irving RAssociates Is Granted a Patent for a New Product for for Which