Cost Accountant (Student) (92 Points)
06 December 2013Hello, here's an economics querry...
For profit maximization, firms should continue producing more output until marginal revenue equals marginal cost. That’s the point where profits are maximized.
My question is, when MR=MC, marginal profit ie MR-MC=0. When marginal profit is zero, how can it be profit maximization ? ?
Rahul Gogate
(Chartered Accountant)
(213 Points)
Replied 08 December 2013
Rahul Gogate
(Chartered Accountant)
(213 Points)
Replied 08 December 2013
Ashok
(Industry)
(416 Points)
Replied 08 December 2013
When mr > mc total profit increases. Beyond a certain level of units, mr < mc total profit decreases. The equilibrium is when mr = mc. This is the point when profits are maximised. In terms of time line it's first mr > mc, then mr = mc and finally mr < mc.
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