When does profit maximization occur?
A) when marginal variable costs equal average revenues
B) when marginal revenue equals marginal cost
C) when total costs equals average fixed revenue
D) when total costs equal total variable costs

Question

Quizplus · Accepted Answer

Profit maximization occurs when the marginal revenue (MR) equals marginal cost (MC), as the MR measures the additional revenue generated by producing one more unit of output, and the MC measures the additional cost of producing one more unit of output. At the point where MR=MC, there is no more profit to be made by increasing or decreasing production, so this is the optimal level of output for the firm.

When Does Profit Maximization Occur