Which of the following conditions must hold to ensure that profits are,in fact,at a maximum? A) d(MC(Q))/dQ 0 B) d(MC(Q))/dQ

Question

Which of the following conditions must hold to ensure that profits are,in fact,at a maximum? A) d(MC(Q))/dQ > 0 B) d(MC(Q))/dQ < 0 C) d²  (Q)/dQ² < 0 D) d(MC(Q))/dQ > 0 and d²  (Q)/dQ² < 0

Quizplus · Accepted Answer

To ensure that profits are at a maximum, two conditions must hold: 1. Marginal cost (MC) must be equal to marginal revenue (MR), i.e., MC(Q) = MR(Q) 2. The second derivative of profit function with respect to quantity (Q) must be negative, i.e., d^2π/dQ^2 < 0. Option D satisfies both conditions as it states that the first derivative of MC with respect to Q is positive (d(MC(Q))/dQ > 0) and the second derivative of the profit function with respect to Q is negative (d²F1F1F1S1F1F1F10(Q)/dQ² < 0). Hence, option D is the correct choice.

Which of the Following Conditions Must Hold to Ensure That