At a firm's profit-maximizing level of output,
A) marginal revenue exceeds marginal cost.
B) marginal revenue is less than marginal cost.
C) total revenue equals total cost.
D) marginal revenue equals marginal cost.
E) normal profit is zero.

Question

Quizplus · Accepted Answer

At the profit-maximizing level of output, marginal revenue equals marginal cost. This is because the firm will continue to produce as long as the additional revenue generated from selling one more unit (marginal revenue) is greater than or equal to the additional cost of producing that unit (marginal cost). Once marginal revenue equals marginal cost, the firm has reached the point where producing any more units would result in a decrease in profit.

At a Firm's Profit-Maximizing Level of Output