Question

Jones is a price-taker producer in some market, and we learned that his most profitable output is where marginal cost equals the market price.   How can this possibly be true, since its cost equals revenue profits can never be higher than zero?  

Answer 1

Since firm is price taker. Therefore, he will maximize its profit at a point where MR=MC and at that point there is no economic abnormal profit.

For rest of the explaination I am uploading images.

nascimizing condition _It means e Decofit maseimining conden is achieved where Ime smul medinal Revenue (MB) or marginal Revenue Product MRPL) is the change in Total Revenue due to I selling of an additional unit It shows the elevenue carined by a freem as it sell an additional unit Maoginal cost is the change in total cost due to production of an additional Feewit of a commodity Case I: kihen IMR < me? In this case, Cost of producing additional Lunit if higher than the govenue generated by selling chim. % Therefore, firm will not peroduce that unit as it inculinod loss in that case . Casett khen IMB imel . In this case, Cost of additional unit is les I his cost. producing of an ann oue ta

The reforce the difference between MR and mc is the pecofit for the from. Therefore, fium will continue oto Preoduce as long as it will eam economic profit adtam The firm will stop at a point at which there is no furthore scope I of earning additional Profit

1 Date Page RANKA and this at that point [MR = mc/ I which is peeofit mireimising condition.

Hence firm continue to produce at a point where MR= MC as it maximize the firm's profit