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

5309 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain the term 'recession' and analyse two possible causes of a recession.


Explain the impact of incentives on the behaviour of economic agents and resource allocation.


What is inflation?


Explain how a reduction in interest rates affect AD.


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