Total profit is maximized when:
A) marginal profit equals average profit.
B) marginal profit equals zero.
C) average profit equals zero.
D) average profit is maximized.
E) marginal profit is greater than average profit.

Question

Quizplus · Accepted Answer

Marginal profit is the additional profit earned from producing one more unit of output. When marginal profit equals zero, the company is producing at its highest level of efficiency and has maximized its profit. At any level of output below this point, the company could increase its profit by producing more. And at any level of output beyond this point, the company would decrease its profit by producing more. Therefore, total profit is maximized when marginal profit equals zero.

Total Profit Is Maximized When