If marginal revenue equals marginal cost ?
Correct answer: C. Profits are maximised
- A. No profit is being made
- B. Total revenue equals total cost
- C. Profits are maximised
- D. Producing another unit would increase profits
Explanation
Profit rises while the revenue from an extra unit exceeds its cost and falls when that cost is higher, so the maximum occurs where marginal revenue equals marginal cost, assuming the marginal cost curve is rising there.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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