Exhibit 7-12 Marginal revenue and cost per unit curves

-As shown in Exhibit 7-12,if the price is OD,the firm's total revenue at its most profitable level of output is:

Question

Exhibit 7-12 Marginal revenue and cost per unit curves
 
-As shown in Exhibit 7-12,if the price is OD,the firm's total revenue at its most profitable level of output is:

Quizplus · Accepted Answer

Total revenue is maximized when marginal revenue equals marginal cost. At the most profitable level of output, marginal revenue is equal to zero. Therefore, total revenue is maximized when price equals marginal cost. In Exhibit 7-12, price is OD and marginal cost is OZ. Therefore, total revenue is maximized when output is OZ. Total revenue at this level of output is OZID.

Exhibit 7-12 Marginal Revenue and Cost Per Unit Curves