MC stands for marginal (extra) cost incurred by a firm when its production raises by one unit. MR stands for marginal (extra) revenue a firm receives from producing one extra unit of output. If the marginal cost is smaller than the marginal revenue, then it is profitable for the firm to produce an extra unit of output.Click to see full answer. Similarly, you may ask, what happens when MC MR? Output where: MC = MR If a firm is producing at a level where marginal revenue is greater than marginal cost, then by producing one more unit the firm can gain more revenue than it loses in cost and thereby makes a marginal profit. MR < MC: the firm is producing too much and can increase profit by decreasing output.Subsequently, question is, what is the difference between marginal revenue and marginal cost? No. Marginal revenue is the amount of revenue one could gain from selling one additional unit. Marginal cost is the cost of selling one more unit. If marginal revenue were greater than marginal cost, then that would mean selling one more unit would bring in more revenue than it would cost. Likewise, people ask, is it enough to say that profit is maximize when MC MR? Thus making no difference to the total profit. However, if the firm produces more than 7 units, it will start losing increasing amounts of money on each successive unit produced, as now the MC > MR, thus eroding away total profit. Hence, profit is maximized when MR = MC.Why is MC MR in Monopoly?The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the firm produces at a greater quantity, then MC > MR, and the firm can make higher profits by reducing its quantity of output.
