Why is profit maximised when mc=mr

Absorb the cost of differentiation, minimizing profit c. All of the choices d. Select a combination of price, quality and product differentiation that will maximize profit.

Save my name and email in this browser for the next time I comment. Profit Maximization Example In the early s and before, airlines typically decided to fly additional routes by asking whether the extra revenue from a flight the Marginal Revenue was higher than the per-flight cost of the flight.

Real World Data In the real world, it is not so easy to know exactly your Marginal Revenue and Marginal Cost of the last products sold. Competition The use of the profit maximization rule also depends on how other firms react. Demand Factors It is difficult to isolate the effect of changing the price on demand. Barriers to Entry Increasing prices to maximize profits in the short run could encourage more firms to enter the market. Is it option d? What are the conditions necessary for profit maximization Reply.

Is conditions for price maximization same as limitatioms Reply. Favourable condition will attract best price for the commodity Reply.

I have a question Due to product differentiation, MC price increase at costs increase. Select a combination of price, quality and product differentiation that will maximize profit Reply.

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Restated, MC is infinite where production is maximized. MR would need to be infinite to maximize profit where production is maximized. Since no one will pay us an infinite price for our product, MC will equal MR at a level of production that is less than maximum production. Advances in production technology increases output from the same level of variable input. The MC cost is the firm's supply curve for the output. Feel free to use and share this content, but please do so under the conditions of our Creative Commons license and our Rules for Use.

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