Econs MR=MC --- Why???
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Answer:
Because when MR > MC, firms can produce more units and still make a profit.
As soon as MR < MC, firms will lose money on additional units.
That means that efficient firms will produce exactly to the point where MR = MC (you get 0 profit in the last item) and no further.
It is very simple really. MR is the increase in revenue from selling one additional unit of the product. This likely to be less than the current price because in order to sell more the company has to lower its price on all of its production. This would not be true if the company is one of thousands all selling the same product. It can sell more at the current price without affecting the price. In this case MR equals the current price. To see if this increase in production actually will increase profits, the company has to compare MR with the increase in production costs if the company produces one more unit which is called marginal cost. If MR is greater than MC, profits will be increased by producing more because the increase in revenue is greater than the increase in costs. If MR is less than MC profits will be increased y producing less because the loss in revenue will be less than the reduction in cost. If MR equals MC, the current level of production will maximize profits.
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