Question

Where do the marginal adjustment to production end? Explain your answer by a figure.

Answer 1

Answer on Question #71553 - Economics / Microeconomics

Question:

Where do the marginal adjustment to production end? Explain your answer by a figure.

Solution:

Marginal adjustment to production ends where MR=MC as its the profit maximization point, its the point where perfectly competitive firm or firm in any market structure maximize profit and minimize losses as shown in below graph

if Marginal revenue greater than MC as At Q1 firm should increase production to increase profit if marginal revenue is less than MC as At Q2 firm can minimize loss by decreasing production when MR= MC firm is maximizing its profit or minimizing losses. its the equilibrium point as Qmax ,