ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -All firms follow the profit-maximizing rule MR=MC. The profit-maximizing rule refers to the output level for which the cost of producing an additional unit equals the revenue that this extra unit brings.

Detailed explanation-3: -The Right Formula In economics, the profit maximization rule is represented as MC = MR, where MC stands for marginal costs, and MR stands for marginal revenue. Companies are best able to maximize their profits when marginal costs–the change in costs caused by making a new item–are equal to marginal revenues.

Detailed explanation-4: -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.

Detailed explanation-5: -The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.