Question

To maximize its profit, a producer should set a price (and produce that related output) where:A. marginal cost is just less than or equal to marginal revenue.

B. marginal cost is at its minimum.
C. price is as high as possible.
D. total revenue equals total cost.
E. marginal revenue is zero

Answer 1

The correct answer is A.

Step-by-step explanation:

To maximize the profit you need to set a price where marginal cost equals marginal income. If marginal income is higher than marginal cost, each additional unit will increase income. If the marginal cost is higher than the marginal income, each additional unit will decrease income. Therefore, to maximize profit Cmg=Img.