Figure 5.2 -Refer to Figure 5.2. If the firm is producing Q₃ units of output, we know that the firm A) could increase profit by producing and selling less. B) could increase profit by producing and selling more. C) is maximizing profit or minimizing losses. D) is earning a normal profit. E) has made a loss on each unit produced before Q₃.

Question

Quizplus · Accepted Answer

When producing Q₃ units of output, the firm is producing at the point where marginal revenue (MR) equals marginal cost (MC). This is the profit-maximizing output level, at which the firm earns zero economic profit (normal profit). Therefore, the firm is maximizing profit or minimizing losses at this level of production. Producing and selling less would result in lost profit opportunities, while producing and selling more would result in increasing marginal costs and decreasing marginal revenue, leading to lower profits.

Figure 5.2 -Refer to Figure 5.2. If the Firm Is Producing Q3

Figure 5.2 -Refer to Figure 5.2. If the Firm Is Producing Q₃