CIMA BA1 · Chapter 7 · Question 6 of 11
A profit-maximising firm will produce at the output where:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Marginal cost equals marginal revenue
Explanation
Profit increases as long as each extra unit adds more to revenue than to cost (MR > MC). Profit is maximised where MR = MC, with MC rising through MR. Minimum average cost and maximum revenue are generally different output levels.
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