To maximize its profit, a producer should set a price (and produce that related output) where:
A) marginal cost is just less than or equal to marginal revenue.
B) marginal cost is at its minimum.
C) price is as high as possible.
D) total revenue equals total cost.
E) marginal revenue is zero.

Question

Quizplus · Accepted Answer

Setting the price where marginal cost is just less than or equal to marginal revenue will maximize the profit because at this point, the producer will be producing the optimal quantity of output where the additional cost of producing one more unit is equal to the additional revenue received from selling that unit. This means that the producer is not leaving any potential profit on the table by producing too much or too little.

To Maximize Its Profit, a Producer Should Set a Price