ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As long as the revenue of producing another unit of output (MR) is greater than the cost of producing that unit of output (MC), the firm will increase its profit by using more variable input to produce more output.

Detailed explanation-2: -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-3: -The change in revenue obtained by increasing the quantity from Q to Q + 1. So the first-order condition tells us that, when Q is at its profit-maximizing level, the marginal revenue is equal to the marginal cost. The marginal cost curve (that is, the function C′(Q)) shows how marginal cost changes as output changes.

Detailed explanation-4: -The point at which marginal cost equals average total cost (MC = ATC) is known as the break-even point.

Detailed explanation-5: -The profit-maximizing quantity will occur where MR = MC-or at the last possible point before marginal costs start exceeding marginal revenue.