Why profit maximizing production is found where the marginal cost of production is equal to the marginal revenue of that production?
- ZirpLv 73 months ago
because it isn't
Why would you produce more when it doesn't bring more revenue?
- OiyLv 63 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.