Using a TR-TC graph,a firm maximizes profit by producing the output level where the greatest
A)vertical distance occurs between the MR and MC curves
B)vertical distance occurs between the TR and TC curves,and the TR curve is above the TC curve
C)total revenue occurs
D)horizontal distance occurs between the TR and TC curves,and the TR curve is above the TC curve
E)horizontal distance occurs between the MR and MC curves,and the MR curve is rising

Question

Quizplus · Accepted Answer

To maximize profit, a firm produces where marginal revenue (MR) equals marginal cost (MC). This is where the greatest distance occurs between the total revenue (TR) and total cost (TC) curves. Therefore, the answer is B as it is the only option that mentions the vertical distance occurring between the TR and TC curves and the TR curve being above the TC curve.

Using a TR-TC Graph,a Firm Maximizes Profit by Producing the Output