A firm maximizes its profit by producing the amount of output such that
A) marginal revenue equals marginal cost.
B) marginal revenue exceeds marginal cost by some amount.
C) marginal revenue is maximized.
D) marginal cost is minimized.
E) marginal revenue exceeds marginal cost by the maximum amount possible.

Question

Quizplus · Accepted Answer

Maximizing profit occurs when marginal revenue (MR) equals marginal cost (MC). This is because the extra revenue received from producing one more unit (MR) is equal to the extra cost of producing that additional unit (MC), meaning that there is no further gain to be made from producing more output. Therefore, choice A is the best answer.

A Firm Maximizes Its Profit by Producing the Amount of Output