When marginal revenue equals marginal cost, it implies that...

When marginal revenue equals marginal cost, it implies that the company is Select one: a. minimising its profit. b. establishing its shutdown point. c. expanding its output. d. maximising its profit.

Transcript

00:01 When marginal revenue equals marginal cost, it implies the company is doing what.

00:06 Okay, so let's look at what we mean by this.

00:08 Marginal is in comparison to what is already being done.

00:13 So marginal revenue is how much money would you make off the next thing you produced.

00:22 So you're producing, say, a hundred of an item.

00:26 How much more money would you make if you made a hundred and one instead? it depends.

00:30 Could you sell it? how much could you sell it for based on demand? so it's based on what you're already doing.

00:35 It's in addition.

00:38 So how much would the n plus one item make us? marginal cost is basically the same thing, except it's instead of going up, it's going down.

00:57 So instead of the money you bring in, it's the money that has to go out.

00:59 How much would it cost to make? how much would it cost to sell the stuff as well overall? so how much would the n plus one item lose? and if these are the same, what we're implying is that if you made an extra item, it would not make a profit.

01:17 Because, of course, revenue minus costs gives us profit.

01:24 So if these are equal, then the marginal profit is zero.

01:32 Well, if the marginal profit is zero, there's no point of making an extra item.

01:36 It's needless effort.

01:38 You would only want to make more.

01:39 You would only want to expand your output if the marginal revenue exceeded the marginal cost.

01:46 I .e...

Question

When marginal revenue equals marginal cost, it implies that the company is Select one: a. minimising its profit. b. establishing its shutdown point. c. expanding its output. d. maximising its profit.

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