Why does profit maximisation occur where MR=MC?

When MR>MCThe change in total revenue as a result of increasing output by one additional unit is greater than the change in total costs.Profit can still be made so firms increase output until MR = MC and they cannot benefit from more profit by increasing output further.When MR<MCThe change in total revenue as a result of increasing output by one is less than the change in total costs. This means the firm is losing profit thus making it unprofitable to do so.Profit is being lost so firms decrease output by one unit until MR = MC is met.

GM
Answered by Georgina M. Economics tutor

5026 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What is the opportunity cost of a good?


Why does the demand line slope downwards?


What is price elasticity of demand?


What is the impact of technological advances on a market?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning