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.

GM
Answered by Georgina M. Economics tutor

4657 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What causes the aggregate demand curve to shift?


What is the difference between public goods and externalities?


Assess how important government policies, other than taxation, are to a business when deciding where to locate its operations. (12)


What will be the effect of an increase in VAT within the UK on GDP?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning