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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

The layperson says that a firm maximizes profits when total revenue (TR) minus total cost (TC) is as large as possible and positive. The economist says that a firm maximizes profits when it produces the level of output at which MR = MC. Explain how the two ways of looking at profit maximization are consistent.

To determine

Explain the two ways of profit maximization.

Explanation

The profit-maximizing output is produced at the point where the marginal revenue is equal to marginal cost (MC=MR). If the marginal revenue is greater than marginal cost (MR>MC)<

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