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Profit Maximisation - MR=MC

Why is there maximum profit when marginal revenue is equal to marginal cost? I can't really understand the explanation in the textbook.

Surely profit is maximised when marginal revenue is greater than marginal cost?

Reply 1

SusanRose7

Watch this, http://www.youtube.com/watch?v=JjjvQSmeWGQ it will help!

Reply 2

Alex-Torres

Is it that when MR>MC there is still extra output you can do which boosts profits, albeit at a smaller revenue.

Reply 3

SusanRose7

Original post by Alex-Torres

Is it that when MR>MC there is still extra output you can do which boosts profits, albeit at a smaller revenue.

When one profit maximises where MC=MR they are charging the highest price out of the 3 main objectives ( including sales and revenue maximisation) and are also supplying the lowest output, therefore profit is maximised, firms which have high market power and dominance can charge high prices AND also restrict output at the same time and gain large supernormal profits.