If a firm seeks to maximize profits, it should produce the quantity where:
A)marginal revenue equals zero.
B)elasticity of demand is less than one.
C)elasticity of demand is greater than one.
D)marginal revenue is maximized.
E)average total cost is minimized.

Question

Quizplus · Accepted Answer

A firm maximizes profits by producing the quantity where marginal revenue equals marginal cost. When the elasticity of demand is greater than one, marginal revenue is positive, allowing the firm to increase profits by increasing output until marginal revenue equals marginal cost.

If a Firm Seeks to Maximize Profits, It Should Produce