A firm has maximized its profits when its marginal revenue equals its marginal cost.

Question

Quizplus · Accepted Answer

When a firm produces a quantity where the marginal revenue (additional revenue earned from selling one more unit) is equal to the marginal cost (additional cost incurred from producing one more unit), it has maximized its profits. Any deviation from this point would result in lower profits. Therefore, a firm sets its output level at the point where MR=MC to maximize its profits.

A Firm Has Maximized Its Profits When Its Marginal Revenue