Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The firm would maximize profit by producing
A)Q1 units.
B)Q2 units.
C)Q3 units.
D)Q4 units.

Question

Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The firm would maximize profit by producing
A)Q1 units. 
B)Q2 units. 
C)Q3 units. 
D)Q4 units.

Quizplus · Accepted Answer

To maximize profit, the firm should produce where marginal cost equals marginal revenue. At Q2 units of production, MC intersects MR at point A, which indicates the profit-maximizing level of output. Any level of production less than Q2 would result in fewer profits, and any level of production above Q2 would result in lowering profits. Therefore, the best choice would be Q2 units.

Figure 15-15 Shows the Cost and Demand Curves for the Erickson