Profit Maximization at MR=MC

When a firm is producing a certain level of output, it aims to maximize its profits. The firm can achieve profit maximization at the point where its Marginal Revenue (MR) equals Marginal Cost (MC). This is the point where the firm can earn the maximum amount of profit.

Explanation:

MR is the additional revenue earned by the firm by selling one more unit of output. MC is the additional cost incurred by the firm by producing one more unit of output. A firm can increase its profits by increasing its output until MR equals MC. At this point, the firm is producing the exact amount of output where the additional revenue earned by producing one more unit is equal to the additional cost incurred by producing one more unit.

If the firm produces less than the point where MR equals MC, then producing one more unit will increase its revenue more than its cost, so the firm can increase its profits by producing more. But if the firm produces more than the point where MR equals MC, then producing one more unit will increase its cost more than its revenue, so the firm can increase its profits by producing less.

Therefore, it is important for a firm to produce at the point where MR equals MC to maximize its profits. This is because at this point, the firm is producing the exact amount of output where the additional revenue earned is equal to the additional cost incurred, so the firm can earn the maximum amount of profit.

Conclusion:

Hence, the correct answer is option 'A', i.e., profits of the firm will be more at MR=MC.