Where does MR = MC rule apply?

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Asked by Lynz, Last updated: Apr 21, 2024

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3 Answers

C. Perez, Writer, Writer, Cleveland

Answered Aug 01, 2019

It applies both to pure monopoly and pure competition. MC and MR are abbreviations related to the Profit Maximization Rule formula. The formula is MC = MR, in which MC stands for Marginal Cost.

MR stands for Marginal Revenue. When more units of goods are produced, the costs increases, which is the Marginal Cost. Marginal Revenue is the slop of the Total Revenue. It is when the rate of sales change, causing a change in the Total Revenue. MC = MR can relate to many things like how many times a TV commercial is running, as well as hours of operation.

Anika Nicole, Wordsmith, PG In Journalism, New York

Answered Jun 27, 2018

MR = MC rule applies both to pure monopoly and pure competition.

Basically, MC=MR is a profit maximization formula where MC stands for Marginal Cost and MR stands for Marginal Revenue.

This maximization rule simply states that if a firm (type doesn't matter) opts for maximizing its profits, it definitely has to choose such a level of output where Marginal Cost (MC) is equal to Marginal Revenue (MR). And Marginal Cost should be rising. We can also say, MR=MC.