If marginal cost is 0, what does it tell us in terms of profit maximization

Answer 1

If the marginal cost is 0, it means that the cost of producing one additional unit of a good or service is effectively zero. In terms of profit maximization, this implies that a firm can continue producing additional units without incurring any additional costs. As a result, the firm should continue producing until the marginal revenue (the revenue generated by selling one additional unit) falls below zero. This is because any revenue generated from selling additional units would contribute to increasing profits since the costs associated with producing those units are negligible.