When a firm has maximized profits

Question

Quizplus · Accepted Answer

When a firm has maximized profits, it has found the level of production where the difference between total revenue and total costs is the greatest. This does not necessarily mean that total costs are minimized, but rather that for the level of output produced, the firm is making the most profit possible given its cost structure. Choices B, C, and D are incorrect because maximizing profit does not imply that the marginal product of each input is maximized, that the marginal physical product is greater than the input price for all inputs, or that marginal cost is zero.

When a Firm Has Maximized Profits