Figure 15-15

Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The firm would maximize profit by producing
A)Q₁ units.
B)Q₂ units.
C)Q₃ units.
D)Q₄ units.

Question

Figure 15-15
  
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The firm would maximize profit by producing
A)Q₁ units. 
B)Q₂ units. 
C)Q₃ units. 
D)Q₄ units.

Quizplus · Accepted Answer

The profit-maximizing level of output is where marginal revenue equals marginal cost, which is at point E where the demand curve intersects with the marginal cost curve. At this point, the firm should produce Q₂ units to maximize profit as it corresponds to the highest vertical distance between the demand and marginal cost curves.

Figure 15-15 Figure 15-15 Shows the Cost and Demand Curves for the and Demand