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JAMB Economics 1979 Question 41

Question 41

Theory of Costs and Revenue

When marginal cost equals marginal revenue product

  1. A.the firm is producing at a loss
  2. B.the firm is at a break-even point
  3. C.the firm is making the least profit
  4. D.the supplementary cost of the firm is highest
  5. E.the firm has maximum profit.
Show the answer and explanation

Answer: E (the firm has maximum profit.)

Explanation

A firm maximises profit where the cost of the last unit equals the revenue it brings in (MC = MR).