Exhibit 8-2 Total revenue and total cost graph
-In Exhibit 8-2, economic profit for the firm is at a maximum when output per week equals:

Question

Exhibit 8-2 Total revenue and total cost graph 
-In Exhibit 8-2, economic profit for the firm is at a maximum when output per week equals:

Quizplus · Accepted Answer

Economic profit is calculated as total revenue minus total cost. The point where economic profit is maximized is where the difference between total revenue and total cost is greatest. This occurs at the output level where the vertical distance between the total revenue and total cost curves is the greatest. In this exhibit, that occurs at an output level of 250 units, where economic profit is $1,000. At any output level greater or lower than 250 units, economic profit is lower because the difference between total revenue and total cost is smaller. Therefore, the best choice is 250 units.

Exhibit 8-2 Total Revenue and Total Cost Graph