Homework Answers
No, I do not agree with this statement.
reason: When MC is farthest from price, it is at its lowest
point. It means that the cost of producing an additional unit of
wheat is the lowest. This happens early in the output level of.
Marginal cost will rise after this point, and will intersect MR
curve on its way up. This is the point where wheat farmer from Iowa
will earn highest profit. At this point, cost of producing an
additional unit of wheat is equal to the revenue obtained from
selling an additional unit. This level is optimum because if MC is
greater than MR, then it reduces the profit, If MR is greater than
MC, then it is profitable for the firm to produce more units of
wheat till MR equals MC.
Therefore, the optimum point of production is where MC = MR.
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