Refer to the following figure:

The figure above shows the demand and cost curves facing a price-setting firm.
-The profit-maximizing (or loss-minimizing) level of output is

Question

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-The profit-maximizing (or loss-minimizing) level of output is

Quizplus · Accepted Answer

The profit-maximizing (or loss-minimizing) level of output is where marginal revenue (MR) equals marginal cost (MC). From the graph, at an output level of 300, MR intersects with MC. At this output level, the firm is earning zero economic profit (or breaking even), but it is the best choice given the options provided. Option A is not the correct answer because at an output of 100, the marginal cost (MC) is above the marginal revenue (MR), and therefore the firm is incurring economic losses. Option B is not the correct answer because at an output of 200, the marginal cost (MC) is still above the marginal revenue (MR), and therefore the firm is still incurring economic losses. Option D is not the correct answer because at an output of 400, the marginal cost (MC) is below the marginal revenue (MR), and therefore the firm is earning positive economic profits, and producing more than they need to be efficient. Option E is not the correct answer because at an output of 450, the marginal cost (MC) is above the marginal revenue (MR), and therefore the firm is incurring economic losses.

Refer to the Following Figure