Comment on the following statement: "Firms should maximize the difference between marginal revenue and marginal cost."
What will be an ideal response?
The statement is false. Firms should maximize profit, which is the difference between total revenue and total cost. At the profit-maximizing level of output, marginal revenue is equal to marginal cost.
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An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision
The second development was that the companies renting eye-surgery machinery to doctors had reduced their charges. In the market for laser eye surgeries, these two developments A) decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries. B) decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries. C) decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price of laser eye surgeries. D) decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries.
As we move down a linear demand curve, the absolute value of the price elasticity of demand:
A) increases. B) stays the same. C) decreases. D) cannot be determined without more information.
One way to get a government contractor to consider life-cycle costs is to _____
a. use a cost plus incentive fee contract b. use a cost plus fixed fee contract c. use a fixed fee plus contract d. also write a maintenance contract with the contractor
If Kobe, an NBA star athlete, earns $10 million per year but has no money in the bank, he has a
a. high income and high wealth. b. low income and high wealth. c. high income and low wealth. d. low income and low wealth.