What is the profit maximizing rule for firms? (i.e. how do they decide what output to produce?) b. Explain why this approach will maximize profits for a firm.
Ans:
Expand output until MR = MC.
If MR> MC, then can get making some profit on each unit, so expand. If MC>MR, then losing money on each unit, so cut back. This must end in the middle, where MR = MC.
Note: this is not setting total revenue = total cost. That would be zero profits. Instead it is calculated at the marginal (the next unit) level.
You might also like to view...
Households act as suppliers when they provide
a. goods and services to firms and governments b. resources to firms and governments c. tax payments to governments d. the demand for only what firms supply or make available e. money to firms in exchange for goods and services
If there is a surplus of a product, its price:
A. is below the equilibrium level. B. is above the equilibrium level. C. will rise in the near future. D. is in equilibrium.
a price index is designed to measure
What will be an ideal response?
Refer to the information provided in Figure 19.1 below to answer the question(s) that follow. 
Figure 19.1 Refer to Figure 19.1. The total tax collections from this payroll tax are
A. $700. B. $1,400. C. $2,100. D. $3,500.