mike asked in Social ScienceEconomics · 1 month ago

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

2 Answers

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  • Zirp
    Lv 7
    1 month ago

    because it isn't

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

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  • Oiy
    Lv 5
    1 month 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
      1 month 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

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