What is the profit-maximizing price?
Understand the Problem
The question is asking for the price that maximizes profit for a particular product or service. To find this, one would typically need to analyze cost structures, demand curves, and potentially consider market competition.
Answer
Price where MR = MC.
The profit-maximizing price is achieved when the firm produces at a quantity where its marginal revenue equals its marginal cost (MR = MC).
Answer for screen readers
The profit-maximizing price is achieved when the firm produces at a quantity where its marginal revenue equals its marginal cost (MR = MC).
More Information
In economic theory, firms are described as setting output where marginal revenue equals marginal cost to maximize profits. This rule applies across different market structures including perfect competition and monopoly.
Tips
A common mistake is confusing MR = MC with MR = 0; MR = MC maximizes profit, while MR = 0 maximizes revenue.
Sources
- Profit maximization (video) - Khan Academy - khanacademy.org
- 2.3: Profit Maximization for a Price Taking Firm - Social Sci LibreTexts - socialsci.libretexts.org
- Profit Maximization in a Perfectly Competitive Market | Microeconomics - courses.lumenlearning.com
