Q72
Which is the first-order condition for the profit of a firm to be maximum?
A.
AC=MR
B.
MC=MR
AnswerC.
MR=AR
D.
AC=AR
Answer: Option B
Solution
Answer: Option B
Solution:
MC=MR is the first-order condition for the profit of a firm to be maximum. The Profit Maximization Rule states that if a firm chooses to maximize its profits, it must choose that level of output where Marginal Cost (MC) is equal to Marginal Revenue (MR) and the Marginal Cost curve is rising. In other words, it must produce at a level where MC = MR.