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: -Answer and Explanation: If marginal revenue is greater than marginal cost, a producer must reduce the level of output to maximize profit.

Detailed explanation-3: -The profit maximization formula depends on profit = Total revenue – Total cost. Therefore, a firm maximizes profit when MR = MC, which is the first order, and the second order depends on the first order. This concept differs from wealth maximization in terms of duration for earning profit and the firm’s goals.

Detailed explanation-4: -When marginal revenue equals marginal cost, the firm has achieved the optimal production quantity, meaning that its profit is maximized if it is in a position of profit or its losses are minimized if it is in a loss position.

Detailed explanation-5: -A firm’s total profit is maximized by producing the level of output at which marginal revenue for the last unit produced equals its marginal cost, or MR = MC. In a perfectly competitive market, MR is equal to the market price P for all levels of output.