The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client.Table 9.2

-A profit-maximizing firm will produce the level of output at which:
A)average revenue equals average cost.
B)average revenue equals average variable cost.
C)marginal revenue equals marginal cost.
D)marginal cost equals average revenue.
E)marginal revenue exceeds marginal cost by the maximum amount.

Question

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client.Table 9.2
 
-A profit-maximizing firm will produce the level of output at which:
A)average revenue equals average cost. 
B)average revenue equals average variable cost. 
C)marginal revenue equals marginal cost. 
D)marginal cost equals average revenue. 
E)marginal revenue exceeds marginal cost by the maximum amount.

Quizplus · Accepted Answer

A profit-maximizing firm will produce the level of output at which marginal revenue equals marginal cost. This is because producing more than this level will result in a decrease in profit as the marginal cost will exceed the marginal revenue, and producing less than this level will also result in a decrease in profit as the marginal revenue will exceed the marginal cost. Therefore, the best choice is C.

The Table Given Below Reports the Marginal Revenue and Marginal