Economics Profit Maximization Questions
In profit maximization, the relationship between marginal cost and marginal revenue is crucial. The goal is to maximize profits by producing at a level where marginal cost equals marginal revenue. This is because when marginal cost is less than marginal revenue, producing an additional unit of output will increase profits. However, when marginal cost exceeds marginal revenue, producing an additional unit will decrease profits. Therefore, to achieve profit maximization, a firm should produce at the level where marginal cost equals marginal revenue.