Assume that a firm is able to cover its variable costs if it operates in the short run.If marginal cost equals $0 for all output levels,then the firm's profit-maximizing output level occurs where
A)total cost is minimized
B)marginal revenue is maximized
C)marginal revenue is minimized
D)marginal revenue equals $0
E)total revenue is minimized

Question

Quizplus · Accepted Answer

When the marginal cost is zero, the profit-maximizing output level occurs where marginal revenue equals $0. This is because at this point, there is no additional cost incurred in producing one more unit of output, and thus any additional revenue generated from selling that output will add to the firm's profit. In other words, the firm will continue to produce and sell units of output as long as the marginal revenue from the last unit sold is greater than or equal to zero.

Assume That a Firm Is Able to Cover Its Variable