Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Marginal cost equals marginal revenue at the optimal production level.
B
Marginal cost should be less than total cost to optimize production.
C
Marginal cost decreases as production increases.
D
Marginal cost has no impact on production decisions.
Understanding the Answer
Let's break down why this is correct
Answer
In microeconomics, the relationship between marginal cost and the optimal level of production is crucial for businesses. Marginal cost is the additional cost of producing one more unit of a good or service. The optimal level of production occurs when the marginal cost equals the marginal revenue, which is the extra income from selling one more unit. For example, if a company finds that producing one more toy costs $5 (marginal cost) and it can sell that toy for $7 (marginal revenue), it makes sense to produce that toy because it increases profit. Therefore, businesses aim to produce at the level where these two costs balance to maximize their profits.
Detailed Explanation
At the best production level, the cost of making one more item (marginal cost) matches the money earned from selling it (marginal revenue). Other options are incorrect because Some might think that marginal cost needs to be lower than total cost to be good; People might believe that as you make more items, the cost to make each one goes down.
Key Concepts
marginal cost
Topic
Optimization in Microeconomics
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.