ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The marginal revenue is the additional revenue added by increasing the quantity. This is also known as the additional revenue “at the margin.” Therefore, profit is maximized when marginal cost equals marginal revenue which is the same as saying when marginal profit equals zero.

Detailed explanation-2: -Maximum profit is the level of output where MC equals MR. When the production level reaches a point that cost of producing an additional unit of output (MC) exceeds the revenue from the unit of output (MR), producing the additional unit of output reduces profit. Thus, the firm will not produce that unit.

Detailed explanation-3: -If marginal cost and marginal revenue are equal, your business has reached its optimal production level. At this level, efficiency has reached its peak, and you’ve maximized profits.

Detailed explanation-4: -Marginal profit is the profit earned by a company when they sell one more unit of production. It is calculated as the marginal revenue (i.e., the amount of revenue earned by a company from the sale of one additional item of production) minus the marginal cost (i.e., the cost of producing one more unit of production).

Detailed explanation-5: -Marginal revenue is the income gained by selling one additional unit, while marginal cost is the expense incurred for selling that one unit. Each measure the incremental change in dollars between varying levels of sales to determine at what level a company is most efficiently producing and selling goods.