The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

A) output-maximizing rule.
B) profit-maximizing rule.
C) shut-down rule.
D) break-even rule.

Question

Karissa Lando · Accepted Answer

Final Answer : B, Explanation :  This is because the objective of a firm is to maximize its profits, and the point where marginal revenue equals marginal cost will lead to the highest possible profits. The shut-down rule refers to the point where a firm should stop production in the short run if price falls below average variable cost, and the break-even rule refers to the point where a firm's total revenue equals total cost. The output-maximizing rule is not a commonly used term.

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

A) output-maximizing rule.
B) profit-maximizing rule.
C) shut-down rule.
D) break-even rule.

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Learning Objectives

Related questions

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:A) output-maximizing rule.B) profit-maximizing rule.C) shut-down rule.D) break-even rule.

Definitions

Learning Objectives

Learning Objectives

Related questions

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

A) output-maximizing rule.
B) profit-maximizing rule.
C) shut-down rule.
D) break-even rule.