Figure 8-3
-A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the
A)vertical distance between the two curves is greatest.
B)total cost curve cuts the total revenue curve.
C)horizontal distance between the two curves is greatest.
D)slope of the total revenue curve is greatest.

Question

Figure 8-3 
-A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the
A)vertical distance between the two curves is greatest. 
B)total cost curve cuts the total revenue curve. 
C)horizontal distance between the two curves is greatest. 
D)slope of the total revenue curve is greatest.

Quizplus · Accepted Answer

The profit maximization point for a firm occurs where the vertical distance between the total revenue curve and the total cost curve is greatest. This is because profit is calculated as total revenue minus total cost, and the largest vertical distance represents the highest profit.

Figure 8-3 -A Company Draws Its Total Cost Curve and Total Revenue