Explain why optimal profits should occur when marginal cost equals marginal revenue.

Q: Is the theory of profit maximization logically perfect?

A: Theory of profit maximization:- The theory of profit maximization defines the conditions of maximum…

Q: Do firms really equate their marginal cost with marginal revenue?

A: Answer

Q: Should the Marginal revenue exceed the marginal cost? Why?

A: The firm is said to be in equilibrium when it has no tendency to increase or decrease its output. If…

Q: Why do economists believe that economic profit is the more accurate measure of a business success?…

A: Accounting profit only considers the cost that has actually happened, but economic profit considers…

Q: What two lines determine whether a firm is making positive or negative or zero profits?

A: Introduction The perfect competitive firm only needs to decide on one thing: how much to make. To…

Q: Many firms in the United States file for bankruptcy every year, yet they still continue operating.…

A: The costs of production include both the fixed costs as well as the variable costs. The fixed costs…

Q: Why would a profitable for-profit organization choose to exit a line of business

A: A for-profit firm or organization is described as an entity that mainly generates profit more than…

Q: When does Concave profit curves occur? Explain with an example?

A: Iso quant curve refers to the curve which shows all the combination of inputs which are capable of…

Q: If marginal profit is negative what information can you infer about marginal cost and marginal…

A: Marginal profit is given as :- Marginal profit = Marginal revenue - Marginal cost It's given that…

Q: Why would a firm that incurs losses choose to produce rather than shut down

A: Shut down point refers to the point where the firm stops its production process. It is the point…

Q: When is allocative efficiency met in a perfectly competitive market? when price equals average cost…

A: When talking about allocative efficiency, it is the market situation when a market is producing a…

Q: what tools and techniques are available to improve a firm's profits?

A: There are many tools and techniques available which is used by the firm to improve profit.Following…

Q: You observed that in the long run, a profit-maximizing firm chose to exit a market. What can you…

A: There is a difference between the cost function in the short-run and in the long-run due to which…

Q: MC ATC P = MR = AR

A: In a perfectly competitive market there are large number of firms producing similar and identical…

Q: Evaluate the view that the main goal of firms will always be profit maximization

A: The profit is the excess revenue made by the firms after deducting the total cost of production from…

Q: Marginal revenue must exceed marginal cost.Explain why?

A: Total revenue is the total receipts collected from the sale of goods or services in the market. The…

Q: why do economists and policy makers use perfect competition as a benchmark to analyze market…

A: Perfectly competitive market: - it is a market condition where there are many buyers and many…

Q: What are the advantages of pure competition?

A: Answer: A purely competitive business is the most efficient type of operation. This is due to the…

Q: Determine the output level that will maximize economic profit.

A: Economic profit is the difference between the sum of explicit and opportunity costs from the revenue…

Q: In a market that allows free entry and exit, when does the process of entry and exit end for the…

A: New firms enter the market when existing firms are making a positive economic profit in the short…

Q: Small “Mom and Pop firms,” like inner city grocery stores, sometimes exist even though they do not…

A: “Mom and Pop firms” is a small independent business entity where the ownership and operations are…

Q: Starting with the generalized profit function, derive the condition for profit maximizing level of…

A: Total cost is the expenditure incurred in the production of goods and services. The total cost is…

Q: What is meant by normal profit?

A: The total revenue earned by a firm operating in a market is the sum of payments received from the…

Q: Why economic profit is negat

A: Profit: It refers to the revenue earned by the companies. With more profit earned by the companies,…

Q: Why must the marginal revenue be equal to the marginal cost for a producer? Explain.

A: Marginal revenue (MR) is the increase in revenue that results from the sale of one additional unit…

Q: ransaction costs and why are they important to why firms exist? (hint: Coase theory)

A: Coase theorem states that in the presence of well-defined property rights, the parties involved in a…

Q: When we know that the firms are earning just normal profits.

A: To find : When do firm earn normal profit.

Q: What does that mean in terms of long-run profit?

A: Perfectly Competitive Market is the market in which buyers and sellers are large in numbers and they…

Q: Why are abnormal profits of a firm difficult to sustain?

A: The abnormal profits under perfectly competitive market are difficult to sustain because of the free…

Q: Why a competitive firm is price taker? Explain graphically why perfect competition is preferable to…

A: When the following conditions exist, firms are said to be in perfect competition: (1) many firms…

Q: Can the given Marginal revenue be negative ?  True or false

A: According to the given question It is the amount of the marginal revenue which usually whatever will…

Q: Explain profit ?

A: The average sales price multiplied by the number of units sold equals revenue. Net income is…

Q: why competitive firms stay in business if they make zero profit?

A: First it should be clear that zero economic profit means that total Total Revenue is equal to the…

Q: What are the advantages of scale in capitalist competition

A: GIVEN   the advantages of scale in capitalist competition   Defination of scale: means cost benefits…

Q: Match the words from the list below to complete the following statement A firm will maximise by…

A: Marginal cost refers to the total costs which arise when the the quantity produced increases by one…

Q: How does a change in the response rate affect profit?

A: A response rate refers to a rate that shows the number of people or participants who have responded…

Q: Revenue is the same as profit. Do you agree with this statement? Justify your answer.

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Assuming that the market for cigarettes is in perfect competition, what do allocative and productive…

A: In a perfectly competitive market, when both the profit-maximizing firms and the utility-maximizing…