Refer to the accompanying graph to answer the following questions.

-All firms,no matter what type of firm structure they are producing in,make their production decisions based on the point where their
A) total revenue equals total cost.
B) marginal revenue equals marginal costs.
C) profits are equal to zero.
D) marginal revenue equals price.
E) average total cost is minimized.

Question

Refer to the accompanying graph to answer the following questions.
 
-All firms,no matter what type of firm structure they are producing in,make their production decisions based on the point where their
A) total revenue equals total cost. 
B) marginal revenue equals marginal costs. 
C) profits are equal to zero. 
D) marginal revenue equals price. 
E) average total cost is minimized.

Quizplus · Accepted Answer

All firms aim at maximizing profits, which occurs when marginal revenue (MR) is equal to marginal cost (MC). Therefore, all firms make their production decisions based on the point where their marginal revenue equals marginal cost, as depicted in the graph. Choice (A) is not sufficient, as total revenue may equal total cost at different output levels. Choice (C) is incorrect, as the goal of firms is to maximize profits, not to break even. Choice (D) is not comprehensive enough, as firms need to consider their costs as well. Choice (E) is a valid strategy to minimize costs, but it does not necessarily lead to maximizing profits.

Refer to the Accompanying Graph to Answer the Following Questions