Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output.
-Refer to Figure 9-3.Assuming that price at 0R is $10,the profit maximizing level of output for the firm is _____.
A)OA where marginal cost just covers AVC
B)OB where average profit per unit is the greatest
C)OC where marginal cost equals the $10 price
D)OK where average cost equals marginal revenue and the firm earns a normal rate of return

Question

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. 
-Refer to Figure 9-3.Assuming that price at 0R is $10,the profit maximizing level of output for the firm is _____.
A)OA where marginal cost just covers AVC 
B)OB where average profit per unit is the greatest 
C)OC where marginal cost equals the $10 price 
D)OK where average cost equals marginal revenue and the firm earns a normal rate of return

Quizplus · Accepted Answer

The profit maximizing level of output for the firm occurs where marginal cost (MC) equals marginal revenue (MR). In the given figure, this occurs at output level OC where the MC curve intersects the MR curve. At this output level, the price is $10 which implies that the firm is able to cover both its variable and fixed costs and earn a normal rate of return. Therefore, the correct option is C.

Use the Following Figure to Answer the Question : Figure