Figure 34.4
-A promoter finds the optimal capacity where capacity is exactly

Question

Quizplus · Accepted Answer

The correct answer is C because the kink in the marginal cost represents a change in the slope of the cost function, which occurs when there is a change in the cost of production. As a result, the point where marginal revenue cuts through the kink in the marginal cost represents the optimal capacity for the firm, because it balances the cost of production (marginal cost) with the revenue earned from selling additional units (marginal revenue). At this point, the firm is able to maximize its profits, because producing more or less than this amount would result in a decrease in profits.

Figure 34.4 -A Promoter Finds the Optimal Capacity Where Capacity Is Exactly