When deciding on the profit maximizing level of output, firms compare ______ of an additional unit of output to the ______.
A) marginal revenue; total cost of production
B) average revenue; total cost of production
C) marginal revenue; marginal cost of producing the additional unit of output
D) average revenue; average cost of producing the additional unit of output

Question

Quizplus · Accepted Answer

When deciding on the profit maximizing level of output, firms compare the additional revenue (marginal revenue) of an additional unit of output to the additional cost of producing that unit (marginal cost). The correct answer is therefore C, as it is the only option that includes marginal revenue and marginal cost in the comparison.

When Deciding on the Profit Maximizing Level of Output, Firms