FSOT Full Test Bank

Answer: C - The cost of making one additional unit is the marginal cost (MC). Similarly, the expected income from selling one additional unit is the marginal revenue (MR). If the marginal revenue is higher than the marginal cost, then it makes sense to produce another unit. The equilibrium production quantity is where MC = MR: If marginal revenue and marginal cost are equal, the producer is indifferent between producing and not producing the additional unit.