What is the profit maximizing price?
Understand the Problem
The question is asking for the price that will maximize profit for a business or product. This typically involves understanding demand, costs, and possibly using models from economics to determine the optimal price point.
Answer
The price at which MR=MC
The final answer is the price at which marginal revenue equals marginal cost.
Answer for screen readers
The final answer is the price at which marginal revenue equals marginal cost.
More Information
Profit maximization is achieved when a firm sets its output such that its marginal revenue equals its marginal cost.
Tips
A common mistake is confusing the concepts of average cost and marginal cost. Always use marginal cost to determine profit-maximizing output.
Sources
- 2.3: Profit Maximization for a Price Taking Firm - Social Sci LibreTexts - socialsci.libretexts.org
- Profit maximization (video) - Khan Academy - khanacademy.org
- Profit Maximization: Definition & Formula | Vaia - vaia.com
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