# What level of output does the profit-maximizing firm produce?

## What level of output does the profit-maximizing firm produce?

The profit-maximizing choice for a perfectly competitive firm will occur at the level of output where marginal revenue is equal to marginal cost—that is, where MR = MC.

## What is the profit-maximizing rule of output?

The general rule is that the firm maximizes profit by producing that quantity of output where marginal revenue equals marginal cost. The profit maximization issue can also be approached from the input side.

What is the profit-maximizing rule a business should produce the quantity where its?

The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.

### Where does a profit-maximizing monopolist selects its output level?

The Monopolist’s Demand Curve and Marginal Revenue So, a profit-maximizing monopolist chooses the output level at which marginal cost is equal to marginal revenue—not equal to price.

### How many units of output should a firm with the cost and demand curves shown above produce to maximize profit?

In order to maximize profit, the firm should produce where its marginal revenue and marginal cost are equal. The firm’s marginal cost of production is \$20 for each unit. When the firm produces 4 units, its marginal revenue is \$20. Thus, the firm should produce 4 units of output.

What is the maximization rule?

The Right Formula In economics, the profit maximization rule is represented as MC = MR, where MC stands for marginal costs, and MR stands for marginal revenue. Companies are best able to maximize their profits when marginal costs — the change in costs caused by making a new item — are equal to marginal revenues.

## What price should the firm charge to maximize its profit?

To maximize profits, the firm should set marginal revenue equal to marginal cost. Given the fact that this firm is operating in a competitive market, the market price it faces is equal to marginal revenue. Thus, the firm should set the market price equal to marginal cost to maximize its profits: 9 = 3 + 2q, or q = 3.

What is the monopolist’s profit at the profit-maximizing level of output?

The monopolist’s profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output.

### At what price will the monopolist maximize his profit?

A monopolistic market has no competition, meaning the monopolist controls the price and quantity demanded. The level of output that maximizes a monopoly’s profit is when the marginal cost equals the marginal revenue.

### What is the profit maximization rule in economics?

Profit Maximization Rule. 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.

How do you calculate profit maximizing output?

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.

## Why is Profit Maximum when marginal cost is rising?

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.

## Which is the profit maximizing choice for a monopoly?

The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.