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    Profits of a price taking firm

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    Why are the profits of a price taking firm maximized when it produces a level of output where price is equal to marginal cost?

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    Comparing total cost and total revenue is one way to find the profit-maximizing rate of output. A second and more revealing way is to use marginal revenue and marginal cost. Marginal revenue is the change in total revenue divided by the change in ...

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    This solution is comprised of a detailed explanation to answer why are the profits of a price taking firm maximized when it produces a level of output where price is equal to marginal cost.

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