Why does profit maximisation occur where MR=MC?

When MR>MCThe change in total revenue as a result of increasing output by one additional unit is greater than the change in total costs.Profit can still be made so firms increase output until MR = MC and they cannot benefit from more profit by increasing output further.When MR<MCThe change in total revenue as a result of increasing output by one is less than the change in total costs. This means the firm is losing profit thus making it unprofitable to do so.Profit is being lost so firms decrease output by one unit until MR = MC is met.

Answered by Georgina M. Economics tutor

3864 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Evaluate the view that mergers always result in a lessening of competition


Why does excessive consumption of alcohol lead to negative externalities ?


Explain fiscal policy and how it can be used


Explain the use of interest rates in the economy.


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo
Cookie Preferences