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

5514 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain how fiscal stimulus might be used to bring about supply-side improvements in the UK economy.


What is bounded rationality?


Should the government stop firms from getting too big?


Outline the effects of a lump-sum tax on companies selling cigarettes and who ends up bearing the burden of the tax. You should assume that there was previously no taxation in this 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:

© 2026 by IXL Learning