The competitive firm maximize profit when it produces output up to the point where ?
Correct answer: D. marginal cost equals marginal revenue
- A. price equals average variable cost
- B. marginal revenue equals average revenue
- C. marginal cost equals total revenue
- D. marginal cost equals marginal revenue
Explanation
Profit rises while the revenue from one more unit exceeds its cost, and falls when that cost is higher. The maximum occurs where marginal revenue equals marginal cost, provided production is worthwhile.
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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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