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The following figure shows the total cost and total revenue curves for a firm.
Figure 9-2
-Refer to Figure 9-2.At which of the following levels of output is the firm maximizing profit?
A)1 unit
B)2 units
C)3 units
D)4 units

Question

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The following figure shows the total cost and total revenue curves for a firm.
Figure 9-2 
-Refer to Figure 9-2.At which of the following levels of output is the firm maximizing profit?
A)1 unit 
B)2 units 
C)3 units 
D)4 units

Quizplus · Accepted Answer

The firm is maximizing profit at the output level where the vertical distance between the total cost and total revenue curves is the greatest. This occurs at the point where the slopes of the two curves are equal, which is at 3 units in this graph. At this output level, the firm is able to earn the greatest amount of profit, as the difference between the total revenue and total cost is the largest. Therefore, the best choice is C (3 units).

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