Asked by Michael Ariestan on May 05, 2024
Verified
Refer to Figure 8.4.2 above. When the farmer's profit is maximized, total cost equals:
A) $1.624
B) $3.696
C) $.6226
D) $264
Profit Maximized
The point at which a firm's profit is at its highest because marginal cost equals marginal revenue.
Total Cost
The complete cost of production, including both fixed costs that do not change regardless of the output level and variable costs that increase or decrease with the level of production.
- Analyze how total revenue, total cost, marginal revenue, and marginal cost correlate with each other and their significance for maximizing profitability.
- Familiarize with the expression of profit maximization in graphical and tabular formats that relate to cost, revenue, and output levels.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
C
Explanation :
When profit is maximized, the marginal revenue (MR) equals the marginal cost (MC) and the quantity produced is where the MC curve intersects the MR curve. In this graph, the MC and MR intersect at a quantity of approximately 2.6. At this quantity, the total cost is shown to be approximately $.6226. Therefore, the answer is C.
Learning Objectives
- Analyze how total revenue, total cost, marginal revenue, and marginal cost correlate with each other and their significance for maximizing profitability.
- Familiarize with the expression of profit maximization in graphical and tabular formats that relate to cost, revenue, and output levels.