The profit-maximizing/loss-minimizing level of output

Question

Quizplus · Accepted Answer

The profit-maximizing or loss-minimizing level of output is where Marginal Cost (MC) = Marginal Revenue (MR). From the given table, we can calculate MC and MR for different output levels as:

| Output (Q) | MC | MR |
| ---------- | -- | -- |
| 20         | 30 | 70 |
| 40         | 40 | 50 |
| 60         | 60 | 30 |
| 80         | 90 | 10 |
| 100        | 130| -10|
| 120        | 180| -30|

So, we can see that MC=MR at Q=100. At this level of output, the firm's total revenue will be ($100 x $70) = $7000 and total cost will be ($130 x 100) = $13,000, resulting in a loss of $6000 which is the least amount of loss among all other output levels. Therefore, the best choice is to produce 100 units to minimize the loss.

The Profit-Maximizing/loss-Minimizing Level of Output