Certified Management Accountant 2026 – 400 Free Practice Questions to Pass the Exam

The expression that represents profit maximization is when marginal revenue equals marginal cost (MR = MC). This principle is foundational in microeconomics, indicating that a firm will increase its profits by continuing to produce until the cost of producing one more unit (marginal cost) is equal to the revenue gained from selling that additional unit (marginal revenue).

At this point, producing beyond this level would mean that the cost of producing additional units would exceed the revenue generated, leading to a reduction in overall profit. Conversely, producing less than this point means that the firm is not taking full advantage of potential profits. Thus, the MR = MC condition is critical in determining the optimal output level for maximum profit.

While the other choices represent important economic concepts, they do not directly pertain to profit maximization in the same way. For example, total revenue equaling total cost indicates a break-even point but does not address profit maximization directly. Marginal cost equating to average total cost suggests that the firm is operating at an efficient scale but does not directly indicate the profit-maximizing output. The last choice provides a formula for total costs but lacks the focus on marginal analysis that is essential for determining the optimal production level for profit maximization.