What is the profit-maximizing rule?
A manager maximizes profit when the value of the last unit of product (marginal revenue) equals the cost of producing the last unit of production (marginal cost).
In a perfectly competitive market P = AR = MR, where P is the price, AR refers to average revenue and MR refers to marginal revenue. Hence, the correct option is (B.) Profit is maximized at the output level where marginal revenue equals marginal cost.
A monopolist maximizes its profits by producing to the point at which marginal revenue equals marginal cost. The monopolist then charges the maximum price for this amount of output, which is the price that consumers are willing to pay for that quantity of output.
Which of the following are true about the profit-maximizing rule of MR=MC? The rule can be re-stated as P=MC when applied to a purely competitive firm because product price and MR are equal.
the profit-maximizing rule of MR=MC states that: (1) in the short-run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost. (2) the rule applies only if producing is preferable to shutting down.
Profit maximisation is a process business firms undergo to ensure the best output and price levels are achieved in order to maximise its returns. Influential factors such as sale price, production cost and output levels are adjusted by the firm as a way of realising its profit goals.
November 2022) In economics, profit maximization is the short run or long run process by which a firm may determine the price, input and output levels that will lead to the highest possible total profit (or just profit in short).
The profit-maximizing quantity is the one at which the marginal revenue of the last unit was exactly equal to the marginal cost. Another way of putting this is that it's quantity at which the marginal cost curve intersects the marginal revenue curve. Producing any more or less would decrease profits.
The correct answer is: a. Marginal revenue does not have to equal marginal cost.. For a competitive firm, profit is maximized when P=MC P = M C .
The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.
What is the profit-maximizing price for a monopoly?
We say that in a monopoly, profit is maximized when MR=MC, just like in a competitive market, when MR = Price = MC. You will remember that in a competitive market, the demand curve is flat. Its slope is zero.
The level of output that maximizes a monopoly's profit is when the marginal cost equals the marginal revenue.
Answer and Explanation: (a) The monopolist faces a perfectly elastic demand curve is NOT generally true about a profit-maximizing monopolist.
Reason: The profit-maximizing rule is to produce the quantity where marginal cost equals marginal revenue. For a perfectly competitive firm, its marginal revenue equals the market price.
The profit maximization rule for a perfectly competitive firm states that the perfectly competitive firm will maximize its profits when it produces that quantity where marginal revenue equals marginal cost for the last unit produced and sold.
-Three general rules for profit maximization:oIf marginal revenue is greater than marginal cost, the firm should increase itsoutput. oIf marginal cost is greater than marginal revenue, the firm should decrease itsoutput. oAt the profit-maximizing level of output, marginal revenue and marginal cost areexactly equal.
The profit maximizing level of output point is where the marginal revenue equals total cost.
A typical example is to maximize profit from producing several products, subject to limitations on materials or resources needed for producing these items; the problem requires us to determine the amount of each item produced.
Profit Maximization consists of the following features: Profit Maximization is also known as cash per share maximization. It helps in achieving the objects to maximize the business operation for profit maximization. The ultimate objective of any business is to earn a huge amount of return in terms of profit.
The profit maximization formula depends on profit = Total revenue – Total cost. Therefore, a firm maximizes profit when MR = MC, which is the first order, and the second order depends on the first order.
What is the profit-maximizing rule for a firm in a perfectly competitive market quizlet?
The profit-maximizing principle states that the optimal amount to sell is when MR = MC. For a firm in a perfectly competitive industry, price is equal to marginal revenue, or P = MR. So, we can restate the MR = MC condition as P = MC.
Profit is maximized at the output at which marginal revenue exceeds marginal cost by the greatest margin. Total profit is represented by the vertical distance between a total revenue curve and a total cost curve.
The cost price p, must be equal to MC. The marginal cost must be non-decreasing at q0.
Profit maximization
The first condition is that the marginal revenue should be equal to the marginal cost, and the second is that the marginal cost should be rising. The profit maximization level of output can be attained by putting marginal revenue equal to the marginal cost.
First order condition for the firm profit is to be maximum is MC = MR. Was this answer helpful?
What is the profit maximization rule for a monopolistically competitive firm? To produce a quantity such that marginal revenue = marginal cost.
The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to marginal cost—that is, where MR = MC.
The profit-maximizing choice for a perfectly competitive firm will occur at the level of output where marginal revenue is equal to marginal cost—that is, where MR = MC.
Solution(By Examveda Team)
International bank for Reconstruction and Development is not a profit maximizing business. The International Bank for Reconstruction and Development (IBRD) is an international financial institution that offers loans to middle-income developing countries.
Answer and Explanation: The correct answer is choice d. Profit maximization inside a monopolistic competitive market entails setting MR = MC. Technically, the price is greater than marginal revenue since the demand curve slopes downward.
Which of the following is necessarily true of the profit-maximizing equilibrium?
The correct option is (b) Price is greater than marginal cost.
An assumption in classical economics is that firms seek to maximise profits. Profit = Total Revenue (TR) – Total Costs (TC). Therefore, profit maximisation occurs at the biggest gap between total revenue and total costs.
A competitive firm uses the following production rule to maximize profits: the firm's profit- maximizing output level is where its marginal cost (MC) just equals the product price and where marginal cost is increasing; that is, the MC curve is sloping upward.
Profit maximisation is an approach that can enable efficient and sustained business growth. If you're ready to expand your business, employing a profit maximisation strategy will ensure that increased effort leads to increased net revenue.
The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.
Examples of profit maximizations like this include: Find cheaper raw materials than those currently used. Find a supplier that offers better rates for inventory purchases. Find product sources with lower shipping fees. Reduce labor costs.
In a monopolistic market, a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce.
The profit-maximizing level of output is found where the distance between TR and TC is largest: π = TR – TC. The solution is found by setting the slope of TR equal to the slope of TC: this is where the rates of change are equal to each other (MR = MC).
-Three general rules for profit maximization:oIf marginal revenue is greater than marginal cost, the firm should increase itsoutput. oIf marginal cost is greater than marginal revenue, the firm should decrease itsoutput. oAt the profit-maximizing level of output, marginal revenue and marginal cost areexactly equal.
The profit-maximizing quantity is the one at which the marginal revenue of the last unit was exactly equal to the marginal cost. Another way of putting this is that it's quantity at which the marginal cost curve intersects the marginal revenue curve. Producing any more or less would decrease profits.
How do you find profit maximizing price and output?
A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm can increase profit by producing one more unit of output.