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If MR is greater than MC, the firm should increase their production. The ideal amount of production is determined by allowing the marginal cost to equal the marginal revenue.

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When marginal revenue equal to marginal cost?

At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.


A perfectly competative firms marginal cost exceeds its marginal revenue at its current output To increase its profit the firm will?

To increase profit the firm will decrease output to a point where MC=MR. This is the Profit Maximisation point


Where does a oligopolist produce at the profit-maximizing?

An oligopolist maximizes profit by producing at the output level where marginal cost (MC) equals marginal revenue (MR). This typically occurs where the firm's marginal revenue curve intersects its marginal cost curve. Given the interdependence among firms in an oligopoly, this output decision also considers the reactions of competing firms, leading to strategic pricing and production choices. As a result, the oligopolist may produce less than the socially optimal output level, which can lead to higher prices for consumers.


What are benefits of marginal costing?

Marginal cost is the extra cost incurred in producing one unit of a product.If the marginal cost is more than average cost that means that costs are increasing and if it is less it means costs are decreasing.This way we find out how are business is progressing.


Why average cost increase when marginal cost is increasing?

Marginal cost = derivative of (Total cost/Quantity) Where Total cost = fixed cost + variable cost Marginal cost = derivative (Variable cost/Quantity) (by definition, fixed costs do not vary with quantity produced) Average cost = Total cost/Quantity The rate of change of average cost is equivalent to its derivative. Thus, AC' = derivative(Total cost/Quantity) => derivative (Variable cost/Quantity) = MC. So, when MC is increasing, AC' is increasing. That is, when marginal cost increases, the rate of change of average cost must increase, so average cost is always increasing when marginal cost is increasing.

Related Questions

What should the firm do if marginal revenue is greater than marginal cost?

If a firm's marginal revenue is greater than its marginal cost, it should increase production to maximize profits.


How can one determine the marginal revenue from marginal cost in a business setting?

To determine the marginal revenue from marginal cost in a business setting, one can calculate the change in revenue from selling one additional unit of a product and compare it to the change in cost from producing that additional unit. If the marginal revenue is greater than the marginal cost, it is profitable to produce more units.


What should a monopoly do if marginal revenue exceeds marginal cost?

increase output


What is the formula to find the marginal cost?

Marginal Cost = Marginal Revenue, or the derivative of the Total Revenue, which is price x quantity.


What is the relationship between marginal cost and marginal revenue in determining optimal production levels?

The relationship between marginal cost and marginal revenue in determining optimal production levels is that a company should produce at a level where marginal cost equals marginal revenue. This is because at this point, the company maximizes its profits by balancing the additional cost of producing one more unit with the additional revenue generated from selling that unit.


What is the relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm?

The relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm is that the firm should produce at a level where marginal revenue equals marginal cost. This is because at this point, the firm maximizes its profits by balancing the additional revenue gained from producing one more unit with the additional cost of producing that unit.


A monopolist will set its production at a level where marginal cost is equal to?

A monopolist will set production at a level where marginal cost is equal to marginal revenue.


Marginal revenue equals?

marginal cost of production


How do you calculate marginal revenue cost by math and graphically and marginal in general?

Profit=Total revenue - Total cost


How does a monopolistically competitive firm determine its profit-maximizing price?

price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co


Why is the equality of marginal revenue to marginal cost essential to profit maximuzation in all of the market structures?

When Marginal Cost is below Marginal Revenue, profit is increasing. When Marginal Cost is above Marginal Revenue, profit is decreasing. Since the goal of firms is to maximise profit, they should produce at a level where the MR of producing another unit is equal to the Marginal Cost of producing another unit. Firms should keep producing until this point because there is a hidden profit in MC. This is because we are not taking into account the Accounting profit.


What happens when marginal revenue equals marginal cost?

profit is maximized