Use the following figure to answer the question : Figure 9-2 : shows the total cost and total revenue curves for a firm.

-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

Use the following figure to answer the question : Figure 9-2 : shows the total cost and total revenue curves for a firm.

-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 level of output where the vertical distance between the total revenue and total cost curves is the greatest, which occurs at 3 units of output. At this level, the firm is earning the highest level of profit. At output levels below 3 units, the firm is not producing enough to cover its costs, while at output levels above 3 units, the firm incurs higher costs than revenue, leading to lower profits.

Use the Following Figure to Answer the Question : Figure