The firm will make the most profits if it produces the quantity of output at which
A)marginal cost equals average cost.
B)profit per unit is greatest.
C)marginal revenue equals total revenue.
D)marginal revenue equals marginal cost.

Question

Quizplus · Accepted Answer

The firm will maximize its profits at the point where marginal revenue equals marginal cost. At this point, the firm is producing the quantity of output at which the revenue earned from the last unit produced (marginal revenue) is equal to the cost of producing the last unit (marginal cost). This means that producing any more units would result in additional costs that are greater than the revenue earned from selling those units, and producing any fewer units would result in additional revenue that is greater than the costs saved by not producing those units. Therefore, the firm should produce the quantity of output at which marginal revenue equals marginal cost to maximize its profits.

The Firm Will Make the Most Profits If It Produces