When a firm is producing at the level of output that maximizes profit, which of the following is true?(1 point)

Question

Responses

Marginal revenue is positive.
Marginal revenue is positive.

Marginal cost is negative.
Marginal cost is negative.

Marginal revenue is equal to marginal cost.
Marginal revenue is equal to marginal cost.

Marginal revenue is greater than marginal cost.
Marginal revenue is greater than marginal cost.

Answer 1

When a firm is producing at the level of output that maximizes profit, the correct statement is:

Marginal revenue is equal to marginal cost.

This is known as the profit-maximizing condition in economics. A firm maximizes its profit when it produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC). If MR is greater than MC, the firm can increase profit by producing more, and if MR is less than MC, the firm can increase profit by producing less.