What Happens If Mr Mc

Marginal revenue and marginal cost (MC) are compared to decide the profit-maximizing output. If MR > MC, then the firm should continue to produce. If MR = MC, then the firm should stop producing the additional unit. … Therefore, this is the profit maximizing output level.

Why does MC equal MR?

Maximum profit is the level of output where MC equals MR. When the production level reaches a point that cost of producing an additional unit of output (MC) exceeds the revenue from the unit of output (MR), producing the additional unit of output reduces profit. Thus, the firm will not produce that unit.

What happens if marginal cost is greater than marginal revenue?

If the marginal revenue is greater than the marginal cost, then the marginal profit is positive and a greater quantity of the good should be produced. Likewise, if the marginal revenue is less than the marginal cost, the marginal profit is negative and a lesser quantity of the good should be produced.