Where does MR = MC rule apply? - ProProfs Discuss

# Where does MR = MC rule apply?

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A. Applies only to pure competition.
B. Applies only to pure monopoly.
C. Does not apply to pure monopoly because price exceeds marginal revenue.
D. Applies both to pure monopoly and pure competition.

This question is part of Economics Test I
Asked by Lynz, Last updated: Aug 07, 2020

#### C. Perez

Just getting better day by day

C. Perez, Writer, Writer, Cleveland

The correct answer to this question is D, 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

Content Writer, Teacher

Anika Nicole, Wordsmith, PG In Journalism, New York

MR = MC rule applies both to pure monopoly and pure competition. Hence, the correct option is D.

Basically, MC=MR is a profit maximization formula where MC stands forMarginal Cost and MR stands forMarginal 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.

John Smith