Question

Figure 12-2 Costs Total and cost Total revenue revenue e b 1,000 2 Quantity Refer to Figure 12-2. How many goods should this firm produce such that its MR was equal to its МC A) 3 B) 4 C) 2 D) 1

Answer 1

Answer

Option C

Q2

The MR=MC is at profit maximum

The profit is maximum at marginal profit equal to zero and marginal profit =MR-MC

MR-MC=0 then the profit is maximum which means at MR=MC

Profit=TR-TC

The profit is maximum when the TR and TC distance is highest and TR>TC

So it is maximum at Q2 units

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The breakeven is at Q0 and Q4 where TR=TC

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An the firm make loss at Q<Q0 and Q>Q4

As the TC>TR