Exhibit 7-12 Marginal revenue and cost per unit curves

If price is equal to OD for the firm shown in Exhibit 7-12, total profit is maximized when:

Question

Exhibit 7-12 Marginal revenue and cost per unit curves

If price is equal to OD for the firm shown in Exhibit 7-12, total profit is maximized when:

Quizplus · Accepted Answer

Total profit is maximized when marginal revenue equals marginal cost, which occurs at output level Z. At any point beyond Z, the marginal cost of production would exceed the marginal revenue earned from selling an additional unit, thus resulting in a decrease in total profit.

Exhibit 7-12 Marginal Revenue and Cost Per Unit Curves