Exhibit 8-12 Marginal revenue and cost per unit curves

If price is equal to OD for the firm shown in Exhibit 8-12, total profit is maximized when:

Question

Exhibit 8-12 Marginal revenue and cost per unit curves

If price is equal to OD for the firm shown in Exhibit 8-12, total profit is maximized when:

Quizplus · Accepted Answer

At output level Z, the marginal revenue curve intersects with the marginal cost curve, leading to the maximum profit for the firm. At output level X and Y, the marginal cost is higher than the marginal revenue, leading to lower profits for the firm. Output greater than Z would result in marginal cost being higher than marginal revenue, decreasing the total profit. Therefore, output level Z is the best choice for the firm to maximize its profits.

Exhibit 8-12 Marginal Revenue and Cost Per Unit Curves