Which statement is TRUE? A)Profit-maximizing behavior occurs only in perfectly competitive markets. B)Additional units of a good should be produced as long as MR MC.

Question

Which statement is TRUE?
A)Profit-maximizing behavior occurs only in perfectly competitive markets.
B)Additional units of a good should be produced as long as MR < MC.
C)The profit-maximizing solution occurs where MR = MC.
D)The profit-maximizing solution occurs where MR > MC.

Quizplus · Accepted Answer

Profit-maximizing behavior occurs in all types of markets, but the profit-maximizing solution occurs where MR = MC. This is because at this point, the firm is producing the level of output where the additional revenue earned from producing one more unit (MR) is exactly equal to the additional cost of producing one more unit (MC). Therefore, the firm cannot increase profits by producing more or less than this level of output.

Which Statement Is TRUE