ENDURING UNDERSTANDING

CBA-2
To determine the optimal level at which to pursue an activity whose total benefits exceed total cost, rational economic agents compare marginal benefits and marginal costs.

LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE
  • CBA-2.D
    a. Define (using graphs or data as appropriate) the profit-maximizing rule.
    b. Explain (using a graph or data as appropriate) the profit-maximizing level of production.
ESSENTIAL KNOWLEDGE
  • CBA-2.D.1
    Firms are assumed to produce output to maximize their profits by comparing marginal revenue and marginal cost.