All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aMarginal revenue is greater than pricebDemand is elastic along the whole curvecMarginal cost is equal to pricedMarginal cost is equal to marginal revenue
Question
All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aMarginal revenue is greater than pricebDemand is elastic along the whole curvecMarginal cost is equal to pricedMarginal cost is equal to marginal revenue
Solution 1
The correct answer is d. Marginal cost is equal to marginal revenue. This is the point where firms maximize their profit. If a firm produces where marginal cost is greater than marginal revenue, it would be making a loss on the last units produced. Conversely, if it produces where marginal cost is less than marginal revenue, it could increase profit by producing more. Therefore, to maximize profit, a firm will produce up to the point where marginal cost equals marginal revenue.
Solution 2
The correct answer is d. Marginal cost is equal to marginal revenue.
This is because profit maximization occurs at the output level where the difference between total revenue and total cost is the greatest. In other words, firms will produce up to the point where the cost of producing an additional unit (marginal cost) is equal to the revenue gained from selling that additional unit (marginal revenue). If the marginal cost were higher than the marginal revenue, the firm would be losing money on each additional unit produced. If the marginal cost were lower than the marginal revenue, the firm could increase profits by producing more units. Therefore, to maximize profits, firms will produce where marginal cost is equal to marginal revenue.
Solution 3
The correct answer is d. Marginal cost is equal to marginal revenue. This is the point where firms maximize their profit. If a firm produces where marginal cost is greater than marginal revenue, it would be making a loss on the last units of output. Conversely, if it produces where marginal cost is less than marginal revenue, it could increase profit by producing more. Therefore, profit-maximizing firms will produce where marginal cost equals marginal revenue, regardless of the shape of the demand curve.
Similar Questions
If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aMust be less than pricebMust be equal to pricecMust be greater than pricedIs not related to the price
2. Imperfectly competitive firms have a demand curve that ________ and a marginal revenuecurve that ________ and is ________ the demand curve.A) is horizontal; is horizontal; the same asB) is horizontal; slopes downward; belowC) slopes downward; slopes downward; belowD) slopes downward; is horizontal; aboveE) slopes downward; slopes downward; the same as
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