Why do firms maximize profits where marginal revenuemarginal

Why do firms maximize profits where marginal revenue=marginal cost?

Solution

If MR>MC, it means each additional unit will add more to revenue than to cost. Therefore, we must not stop production.

If MR>MC, it means each additional unit is adding more ot MC than to MR. Therefore, we must not continue with production.

Hence profit is maximized where MC = MR but there is second condition which must also be fulfilled. MC must be rising after this unit.

Why do firms maximize profits where marginal revenue=marginal cost?SolutionIf MR>MC, it means each additional unit will add more to revenue than to cost. The

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