A firm has a marginal cost equation SMC = 10 + .01Q and its AVC = 10 + .005Q. If it can sell any amount of output it wished for $200.00 per unit, its total profit will be maximized loss minimized) at Q = 12,000 units.

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The profit maximization condition requires setting marginal cost (MC) equal to marginal revenue (MR), not average variable cost (AVC). Given the price of $200 per unit, MR = $200. The firm's profit-maximizing output level is determined by equating SMC to MR, not by using AVC or specifying a quantity without solving the equation SMC = MR.

A Firm Has a Marginal Cost Equation SMC = 10