Assume that a firm is producing an output level such that marginal revenue equals marginal cost. One can correctly conclude that
A) the firm is earning positive economic profit.
B) the firm is earning normal profit.
C) the firm is breaking even.
D) total cost exceeds total revenue by the maximum amount.
E) as long as the firm is covering all of its variable costs, it is producing at the optimal level of output.

Question

Quizplus · Accepted Answer

When a firm is producing at a level where marginal revenue equals marginal cost, it is operating at the optimal level of output. This principle does not necessarily indicate the firm's profitability status (whether it's earning a positive economic profit, normal profit, or breaking even). It simply means the firm is making the most efficient production decision to maximize profit or minimize losses, assuming it covers all of its variable costs.

Assume That a Firm Is Producing an Output Level Such