ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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You can use this rule to find a firm’s profit-maximising output level from a diagram showing MR and MC-you can draw this for a price taking and price making firm.
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Explanation:
Detailed explanation-1: -Maximum profit is the level of output where MC equals MR. Thus, the firm will not produce that unit. Profit is maxmized at the level of output where the cost of producing an additional unit of output (MC) equals the revenue that would be received from that additional unit of output (MR).
Detailed explanation-2: -The main output decision for a price-taking firm is the decision of how many goods or services to sell. To maximize profits, a perfectly competitive firm will choose a quantity where the market price is equal to marginal costs (P* = MC).
Detailed explanation-3: -The profit-maximizing point lies on the downward-sloping part of an isoprofit curve, where price exceeds marginal cost.
There is 1 question to complete.