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 where marginal revenue is equal to marginal cost. In this case, that occurs at output level Z. At output level X or Y, marginal cost is greater than marginal revenue, resulting in lower total profits. Output greater than Z would result in higher marginal costs than marginal revenue, resulting in lower total profits.

Exhibit 7-12 Marginal Revenue and Cost Per Unit Curves