Question

Assume a perfectly competitive firm is producing at a levelof output which MRMC. What should the firm do to maximize its profits? a. The firm should do nothing - it wants to maximize the difference

Answer 1

Profit maximization is the economic theory that states that profit is equal to total revenue minus total costs. A firm maximizes profit at the point where the output and price levels are controlled to maximize its returns. At the profit maximization point firms have optimal efficiency. Profit maximization is equal to marginal revenue minus marginal cost.