(Figure: Profit Maximization for SoCalGas) Use Figure: Profit Maximization for SoCalGas. SoCalGas's unit profit is:

A)$5.
B)$12.
C)$15.
D)$20.

Question

(Figure: Profit Maximization for SoCalGas) Use Figure: Profit Maximization for SoCalGas. SoCalGas's unit profit is:

A)$5. 
B)$12. 
C)$15. 
D)$20.

Quizplus · Accepted Answer

The unit profit is maximum at the quantity level where marginal cost equals marginal revenue, which is 9 therms in this case. At 9 therms, the unit profit is $12. At any other quantity level, the unit profit is less than $12. Therefore, the best choice is to produce and sell 9 therms to maximize profit.