A firm maximizes profit when
A) total revenue equals total cost.
B) marginal revenue equals marginal cost.
C) total revenue is maximized.
D) it produces its output at the lowest cost per unit.
E) it produces the quantity that consumers desire.

Question

Quizplus · Accepted Answer

Maximizing profit occurs when the marginal revenue generated by a firm's last unit produced is equal to its marginal cost of production. At this point, the firm is producing an optimal quantity of output and is generating the highest possible profit. Choices A, C, D, and E do not necessarily lead to profit maximization as they do not take into account the relationship between marginal revenue and marginal cost.

A Firm Maximizes Profit When