Difference between revisions of "Economics Discussion"
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(→Topic 1: That is when total profits are at their maximum for a firm.) |
(For model answers to the homework, see Economics Homework) |
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== Topic 1 == | == Topic 1 == | ||
Revision as of 01:29, May 21, 2013
For model answers to the homework, see Economics Homework.
Topic 1
Why do all firms, including even monopolies always sell their products where marginal revenue (MR) equals marginal cost (MC): MR=MC?
- Because all firms want to maximize profits, and profits are at their maximum when marginal profit = 0. But marginal profit (MP)= MR-MC, so when MP=0, then MR-MC=0, which means MR=MC. That is when total profits are at their maximum for a firm.