In Figure 24.2, the profit-maximizing level of output is
A) Between 2 and 3 units.
B) Between 4 and 5 units.
C) 4 units.
D) Between 5 and 6 units.

Question

In Figure 24.2, the profit-maximizing level of output is
A) Between 2 and 3 units. 
B) Between 4 and 5 units. 
C) 4 units. 
D) Between 5 and 6 units.

Quizplus · Accepted Answer

The profit-maximizing level of output is where marginal revenue (MR) equals marginal cost (MC) and where MR is falling. In this figure, MR is falling after 4 units and intersects with MC at 4 units. Therefore, the profit-maximizing level of output is 4 units.