What is the underlying reason that maximum profit comes at the level of output where marginal cost equals price?
A)there is additional profit as long as the price is greater than the marginal cost of the last unit.
B)there is additional profit when the marginal cost of a unit is higher than the price.
C)there is no more profit when the price is greater than the marginal cost of the last unit.
D)price is not important in determining profit.
E)none of the above.

Question

Quizplus · Accepted Answer

The principle that maximum profit occurs where marginal cost (MC) equals price (P) is based on the idea that profit increases as long as the revenue from selling an additional unit (reflected by the price) is greater than the cost of producing that unit (marginal cost). When MC equals P, producing more would mean MC exceeds P, reducing profit.

What Is the Underlying Reason That Maximum Profit Comes at the Level