BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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TR-TC
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MR=MC
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MR cuts MC from below
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slope of MC curve must be higher than that of MR curve
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Detailed explanation-1: -First order condition for the firm profit is to be maximum is MC = MR.
Detailed explanation-2: -MC=MR is the first-order condition for the profit of a firm to be maximum. The Profit Maximization Rule states that if a firm chooses to maximize its profits, it must choose that level of output where Marginal Cost (MC) is equal to Marginal Revenue (MR) and the Marginal Cost curve is rising.
Detailed explanation-3: -Detailed Solution The profit-maximizing choice for a perfectly competitive firm will occur at the level of output where marginal revenue is equal to marginal cost, that is, where MR = MC.
Detailed explanation-4: -A manager maximizes profit when the value of the last unit of product (marginal revenue) equals the cost of producing the last unit of production (marginal cost). Maximum profit is the level of output where MC equals MR.
Detailed explanation-5: -Why is profit maximised when MR = MC? At production levels of MR = MC, the difference between the total revenue and total cost is maximum which serves as our requirement for producer’s equilibrium and leads to profit maximization.