At pair 4 level of production are you making the greatest profit.
What is Maximum profit?
- Maximum profit is that the level of output where MC equals MR.
- As long because the revenue of producing another unit of output (MR) is greater than the cost of producing that unit of output (MC), the firm will increase its profit by using more variable input to supply more output.
- The law of (the reality of) diminishing marginal productivity demonstrates that adding input will eventually reduce production and increase cost.
- When the assembly level reaches a point that cost of producing an additional unit of output (MC) exceeds the revenue from the unit of output (MR), producing the extra unit of output reduces profit. Thus, the firm won't produce that unit.
- Profit is maximized at the extent of output where the cost of producing an additional unit of output (MC) will be equal to the revenue that would be received from that additional unit of output (MR).
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