Exhibit 7-2 Total revenue and total cost graph

In Exhibit 7-2, economic profit for the firm is at a maximum when output per week equals:

Question

Exhibit 7-2 Total revenue and total cost graph

In Exhibit 7-2, economic profit for the firm is at a maximum when output per week equals:

Quizplus · Accepted Answer

Economic profit is maximized when the vertical distance between total revenue (TR) and total cost (TC) is at its greatest. This occurs when output per week is at the point where the slope of the TC curve intersects with the slope of the TR curve, which is at 250 units in this exhibit. At this point, the firm's total revenue equals $75,000 and its total cost equals $60,000, resulting in an economic profit of $15,000. At any point to the left or right of this output level, the firm's economic profit will be lower.

Exhibit 7-2 Total Revenue and Total Cost Graph