promotion image of download ymail app
mike asked in Social ScienceEconomics · 3 months ago

Why profit maximizing production is found where the marginal cost of production is equal to the marginal revenue of that production?

2 Answers

  • Zirp
    Lv 7
    3 months ago

    because it isn't

    Why would you produce more when it doesn't bring more revenue?

    • Commenter avatarLogin to reply the answers
  • Oiy
    Lv 6
    3 months ago

    Because if marginal revenue(MR) is > than the marginal cost(MC), the increase in output will bring more profits. In a perfectly competitive market. it means also that the price is higher than the cost at that given unit of production. On the other hand, if MR is < than MC, the producer is in a loss, because the price is lower than the cost at that level. It has to reduce output. To do that MC will decline, and be equal to MR in the end.

    • Lv 4
      3 months agoReport

      good clear answer; also, where MR=MC, neiither amount is larger or smaller than the other; & eg where MC > MR for all shortrun q, then q would be zero to minimise loss

    • Commenter avatarLogin to reply the answers
Still have questions? Get your answers by asking now.