The notion that a business should produce up to the point at which the added revenue from the sale of an extra unit of output is equal to the added cost of producing it is known as the:
A)output-maximizing rule
B)profit-maximizing output rule
C)shutdown rule
D)breakeven rule
E)output-minimizing rule

Question

Quizplus · Accepted Answer

The profit-maximizing output rule is the idea that, in order to maximize profits, a firm should produce up to the point where marginal revenue equals marginal cost. This is because any additional unit produced will result in added cost that exceeds the revenue earned from selling that extra unit. The shutdown rule is the point at which a business should stop producing altogether because the cost of operating is greater than the revenue earned. The breakeven rule is when a business produces enough to cover all of their costs but does not generate a profit. The output-maximizing rule and output-minimizing rule are not commonly used in business strategy.

The Notion That a Business Should Produce Up to the Point