Which of the Following Offers the Best Explanation of Why

question 57

Multiple Choice

Which of the following offers the best explanation of why "marginal revenue equals marginal cost" is the rule that indicates the profit-maximizing output level?

• A) If output were reduced from the profit-maximizing level, then the firm would be gaining marginal revenue that exceeds marginal cost, and thus increasing the level of profit.
• B) If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit.
• C) Because the firm colludes with other similar firms to set price equal to marginal cost.
• D) The marginal revenue is equal to the marginal cost at all levels of output for a perfectly competitive firm.

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Definitions:

Credit Risk

The potential that a borrower will fail to meet their obligations in accordance with agreed terms.

Capital Resources

Economic assets used by businesses to produce goods and services, such as buildings, machinery, and equipment.

Market Economy

An economic system where supply and demand dictate the production, distribution, and pricing of goods and services, with minimal government intervention.

Bankruptcy

A legal process whereby individuals or entities that cannot repay debts to creditors seek relief from some or all of their debts.