why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Expert Solution

Marginal revenue refers to a change in total revenue as a result of selling an additional unit of output. Marginal cost is the additional cost owing to the production of an additional unit of output. When marginal cost is greater than marginal revenue then it shows that the production of one more unit will not make any profit to the firm as the cost of producing one more unit of output will be more than revenue. So the firm will cut down its production. When Marginal revenue is greater than marginal cost then it shows that the production of one more unit will add more to the profit. So the firm will continue producing until marginal cost equals marginal revenue. Because producing one more unit of output after this point will make the marginal cost more than marginal revenue which will result in losses to the firm. So when marginal revenue is equal to marginal cost you can not increase the profit anymore.

Rahul Sunny answered 8 months ago

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost,...

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? Why? What is the profit-maximizing quantity for any firm to produce?

What is the profit maximizing level of output for a firm with the marginal cost function MC

What is the profit maximizing level of output for a firm with the marginal cost function MC = 1.6Q2-15Q+60 and a marginal revenue function MR = 280-20Q?

1. Which of the following is true about the output level where marginal revenue equals marginal...

1. Which of the following is true about the output level where marginal revenue equals marginal cost? Group of answer choices The firm is maximizing profit. Economic profits are equal to zero. The firm should reduce its output. The firm should increase its output. 2. The price charged by a profit-maximizing monopolist occurs Group of answer choices At the minimum of the long-run average total cost curve. Where P = MR = MC. At a price on the demand curve...

1. Firm X is producing the quantity of output at which marginal revenue equals marginal cost....

1. Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is earning A. a positive economic profit. B. an economic loss. C. a normal profit. D,There is not enough information to answer the question. 2. A perfectly competitive firm will always maximize short-run profits by producing the level of output where the average total cost is minimized. A.True B.False

For competitive firms, they set marginal cost equal to market price at profit-maximizing level of output....

For competitive firms, they set marginal cost equal to market price at profit-maximizing level of output. In the short run, marginal revenue curve faced by a competitive firm is downward-sloping. Competitive firms always produce a positive amount of output in the short run (q > 0). Competitive firms earn zero economic profit in the long run equilibrium. All these are True False Questions

T/F If the marginal revenue is less than the marginal cost, a profit-maximizing price taker should increase its output.

13) T/F If the marginal revenue is less than the marginal cost, a profit-maximizing price taker should increase its output.14) T/F When a firm is operating in a price-taker market, marginal revenue is always less than the market price.15) T/F When an economist says a firm is earning zero economic profit, this implies that the firm will likely have to declare bankruptcy in the near future unless market conditions change.16) T/F In the year 2008, nearly three out of four...

Why will a profit-maximizing firm never choose to produce at a quantity where marginal cost exceeds marginal revenue?

Why will a profit-maximizing firm never choose to produce at a quantity where marginal cost exceeds marginal revenue?a. Draw the marginal cost/marginal revenue graph and use it to help you explain.b. Which two lines on a cost curve diagram intersect at the zero-profit point?

a. If the marginal revenue is less than the marginal cost, what should a profit-maximizing company...

a. If the marginal revenue is less than the marginal cost, what should a profit-maximizing company do? b. In a perfectly competitive graph, how does one calculate the economic profit? c. What is the shutdown point in a perfectly competitive firm? ' d. Briefly, what is the difference between economies of scale and diseconomies of scale? Why is it important to the firm? e. Given the following total cost function TC(q) = 1000 + 13q. Find the fixed cost, variable...

marginal revenue equals marginal cost to maximize total revenue

Question