According to the economic theory,profit is maximized when the firm operates at that point at which:
A) Average revenue equals average cost
B) Total revenue equals total cost
C) Marginal revenue equals marginal cost
D) Average total cost equals marginal cost
E) Average fixed cost equals average variable cost

Question

Quizplus · Accepted Answer

Marginal revenue equals marginal cost is the point where profit is maximized according to economic theory. This is because at this point, the additional revenue earned from producing an additional unit of output is exactly equal to the additional cost of producing that unit, ensuring that the firm is earning the maximum profit possible.

According to the Economic Theory,profit Is Maximized When the Firm