All Firms Should Produce at MR=MC
In economics, the point of profit maximizing and loss minimizing is called MR=MC. This point is where marginal revenue equals marginal cost, meaning that cost does not exceed revenue and revenue does not exceed cost. This is a profit-maximizing zone, meaning that total cost is not the lowest, but is farthest away from the total returns. The optimal point of production for the firm is at the point MR=MC. Marginal revenue is defined as the change in total revenue as a result of producing an additional unit, while marginal cost is the increase or decrease of a firm's total cost of production as a result of the change in production by one additional unit. When these two are equal, the firm is not losing money, and is making the most profit possible. …
