Exhibit 22-2 ​

Exhibit 22-2
​

-Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC) , is it guaranteed maximum profit or minimized loss?

A) Yes, when MR = MC, it follows that MR - MC = 0, and thus the firm maximizes profit and minimizes losses.
B) No, at the quantity of output at which MR = MC, it could be the case that average variable cost is greater than price and the firm would do better to shut down.
C) Yes, when the firm produces the quantity at which MR = MC, it has maximized both revenue and profit.
D) Yes, because if the MC curve is rising, the average total cost curve always lies below it and thus profit is earned.