Question: Explain why the rule MR=MC defines profit maximization.

Explain why the rule MR=MC defines profit maximization.

Step by Step Solution

★★★★★

3.43 Rating (172 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The goal of the firm is to add value Profits are maximized when the greates... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

340-B-E-M-E (2861).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Q:

Explain why the P = MC rule is the same as the MR = MC rule for perfectly competitive firms.

Q:

Why is value maximization superior to profit maximization as a goal for management?

Q:

Explain why profit maximization is not the best goal for a company. What is an appropriate goal?

Q:

Explain the differences between accounting profit vs economic profits. Which profit measure would Google use? Explain 2. Explain the Total Cost Formula and its variables. List Formula and discuss...

Q:

Explain, in your own words, why profit maximization happens at the point where MR = MC, and not where MR is greater than MC. Refer to Figure 7.2. in the textbook. Should the 4th unit of output be...

Q:

Explain, in your own words, why profit maximization happens at the point where MR = MC, and not where MR is greater than MC. Refer to Figure 7.2. in the textbook. Should the 4th unit of output be...

Q:

Part 1: Explain, in your own words, why profit maximization happens at the point where MR = MC, and not where MR is greater than MC. Refer to Figure 7.2. in the textbook. Should the 4th unit of...

Q:

Homework #8 -Perfect Competition Part 1: Perfect Competition: why It Matters Firms are said to be in perfect competition when the following conditions occur: it Many firms produce identical products....

Q:

Homework #8 -Perfect Competition Part 1: Perfect Competition: Why It Matters Firms are said to be in perfect competition when the following conditions occur: Many firms produce identical products....

Q:

Homework #8 -Perfect Competition Part 1: Perfect Competition: Why It Matters Firms are said to be in perfect competition when the following conditions occur: Many firms produce identical products....

Q:

Assume that at the end of the accounting period there are credit balances of $6,800 in Patient Services Revenues and $3,600 in Laboratory Fees Revenues. Prepare the required closing entry in journal...

Q:

At what amount are purchases recorded under the net-price method?

Q:

suppose that you have estimated tge fama - french three factor and four - factor models for three different stocks: BCD , FGH , and JKL . Specifically, using return data from a recent five - year...

Q:

Exchange Rates [LO1] Suppose the rate of inflation in the Eurozone will be about 3 per cent higher than the UK inflation rate over the next several years. All other things being the same, what will...

Q:

Why might a firm continue to produce in the short run even though the market price is less than its average total cost?

Q:

Label the curves in the following graph. a. At each market price, P 1 , P 2 , and P 3 , at what output level would the firm produce? b. What profit would be earned if the market price was P 1 ? c....

Q:

GMs net income in 2010 was \($4.7\) billion. What would its accounting profit be if its cost of equity capital was \($5\) billion? What would its economic profit be if its cost of equity capital was...

Q:

A simple random sample from a population with a normal distribution of 105 body temperatures has x = 98.90"F and s =0.63"F. Construct a 90% confidence interval estimate of the standard deviation of...

Q:

What is the future value of $1,100 placed in a savings account for four years if the account pays 8.00% compounded quarterly?

Q:

Butler International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $ 950,000 1 285,000 2 345,000 3 415,000 4 255,000 All cash flows...