Profits are maximized when ?
Correct answer: D. marginal cost equals marginal revenue
- A. costs are minimized
- B. revenue is maximized
- C. average cost is less than average revenue
- D. marginal cost equals marginal revenue
Explanation
Profit is maximised at the output where marginal revenue equals marginal cost, provided marginal cost is rising through that point. This condition balances the extra revenue and extra cost of the last unit.
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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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