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Explain in detail why MR = MC is the rule for firms to follow in order...

Explain in detail why MR = MC is the rule for firms to follow in order to maximize profits (minimize losses).

* the one currently online in Chegg doesnt make sense at the end of the paragraph?

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Answer #1

Since the profit maximising condition is that the difference between total cost and total revenue must be maximum.

So for maximising total profit, the derivatives of total profit function is taken and it is equalised with zero.

From there, the profit maximising condition MR=MC is derived.

This condition exist because with the production of more units the Average cost of production decrease and total revenue increase, so the total profit is maximised.

The firm is willing to sell an additional unit of goods until MR is greater than or equal to to MC.

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