Figure 7.3
-The firm in Figure 7.3 will produce
A) Q₁.
B) Q₂.
C) Q₃.
D) Q₄.

Question

Figure 7.3
-The firm in Figure 7.3 will produce
A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Quizplus · Accepted Answer

Producing Q₂ maximizes profit as it is the level of output where marginal revenue (MR) equals marginal cost (MC). At any level of output lower than Q₂, the marginal revenue is higher than the marginal cost, indicating that the firm can increase profit by producing more. At any level of output greater than Q₂, the marginal cost is higher than the marginal revenue, indicating that the firm can increase profit by producing less. Therefore, Q₂ is the profit-maximizing level of output for this firm.

Figure 7.3 -The Firm in Figure 7.3 Will Produce