GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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For maximisation of profit in the short run, the condition is
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AR = AC
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MC = AC
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MR = AR
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MR = MC
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Explanation:
Detailed explanation-1: -Production is stopped only when MR becomes equal to MC. MR is the addition to TR from the sale of one more unit. MC is the addition to TC when an additional unit is produced. Thus when MR=MC, TR-TC becomes maximum for maximum profit.
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.
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