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 the difference between total revenue and total cost. We can see from the graph that at a production level of 250 units, total revenue is $25,000 and total cost is $20,000. This gives an economic profit of $5,000, which is the maximum profit the firm can earn. At any production level above or below 250 units, economic profit is lower. Therefore, the best choice for the firm is to produce 250 units per week.

Exhibit 8-2 Total Revenue and Total Cost Graph