According to the rule for maximizing profit, the highest profit is earned at the price where
A) average cost is just less than or equal to marginal revenue.
B) average cost is just less than or equal to average revenue.
C) total revenue is just greater than total costs.
D) marginal cost is just less than or equal to marginal revenue.
E) total revenue is equal to total costs.

Question

Quizplus · Accepted Answer

The rule for maximizing profit states that a firm should produce at the quantity where marginal revenue equals marginal cost. At this quantity, the firm is producing at the efficient scale and is earning the most profit possible. Therefore, the price that maximizes profit would be the price where marginal cost is just less than or equal to marginal revenue. This is because at this price, the firm is able to sell its products at a price that covers the cost of producing one more unit while also generating additional revenue for the firm.

According to the Rule for Maximizing Profit, the Highest Profit