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Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
A company is maximizing profit when marginal revenue?
A company maximizes profits when marginal revenue equals marginal costs.
What happens when marginal revenue equals marginal cost?
profit is maximized
Does marginal revenue equal price in a perfectly competitive market?
Yes, in a perfectly competitive market, marginal revenue equals price.
Why is it that when a firms marginal revenue product equals the wage rate marginal revenue also equals the marginal cost?
When a firm's marginal revenue product (MRP) equals the wage rate, it indicates that the additional revenue generated by hiring one more unit of labor matches the cost of employing that labor. At this point, the firm maximizes its profit by employing labor up to the point where the cost of additional labor (wage) equals the additional revenue generated (MRP). Consequently, since marginal revenue (MR) from selling output also equals the price in a competitive market, and given that marginal cost (MC) reflects the cost of producing additional output, the condition where MRP equals wage leads to the situation where MR equals MC, ensuring optimal production decisions.
Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
A company is maximizing profit when marginal revenue?
A company maximizes profits when marginal revenue equals marginal costs.
What happens when marginal revenue equals marginal cost?
profit is maximized
Why are profit maximize when marginal revenue is equal to marginal cost?
Profits are maximized when marginal costs equals marginal revenue because fixed costs are now spread over a larger amount of revenue. This means that total cost per unit declines and profits increase. Another way to say this is that this is the effect of scale. When marginal revenue equals marginal costs, in a growing revenue situation, you gain economies of scale and higher profits.
Does marginal revenue equal price in a perfectly competitive market?
Yes, in a perfectly competitive market, marginal revenue equals price.
Why is it that when a firms marginal revenue product equals the wage rate marginal revenue also equals the marginal cost?
When a firm's marginal revenue product (MRP) equals the wage rate, it indicates that the additional revenue generated by hiring one more unit of labor matches the cost of employing that labor. At this point, the firm maximizes its profit by employing labor up to the point where the cost of additional labor (wage) equals the additional revenue generated (MRP). Consequently, since marginal revenue (MR) from selling output also equals the price in a competitive market, and given that marginal cost (MC) reflects the cost of producing additional output, the condition where MRP equals wage leads to the situation where MR equals MC, ensuring optimal production decisions.
How can marginal revenew and marginal costs help set the most profitable putput level?
The most profitable output level is when marginal costs equals marginal revenue. When marginal revenue is larger than marginal cost, that means that more product can be produced for more profit.
Why is profit maximized when marginal revenue equals marginal cost?
Profit is maximized when marginal revenue equals marginal cost because at that point, the additional revenue gained from selling one more unit is equal to the additional cost of producing that unit. This balance ensures that the company is making the most profit possible, as any further increase in production would result in higher costs than revenue gained.
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 level of output every firm strives for?
The level of output every first strives for is when marginal revenue equals marginal cost.
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.
Why does demand equal marginal revenue in perfect competition?
In perfect competition, demand equals marginal revenue because firms in this market structure are price takers, meaning they have no control over the price of their product. As a result, they must sell their goods at the market price, which is also their marginal revenue.
