Economics Cost Of Production Questions
The role of marginal cost in profit maximization is to help determine the optimal level of production. In order to maximize profits, a firm should continue producing as long as the marginal cost of producing an additional unit is less than or equal to the marginal revenue generated from selling that unit. Once the marginal cost exceeds the marginal revenue, the firm should stop producing as it would result in a decrease in profits. Therefore, marginal cost helps in identifying the level of production that maximizes profits.