The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client.Table 9.2

-A firm enjoys a positive economic profit when:
A)the demand curve touches the average cost curve at the profit-maximizing level of output.
B)the marginal revenue curve has a negative intercept on the ordinate axis.
C)the average revenue curve lies below the average cost curve at the profit-maximizing level of output.
D)the marginal cost is declining at the profit-maximizing level of output.
E)the average revenue curve lies above the average cost curve at the profit-maximizing level of output.

Question

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client.Table 9.2
 
-A firm enjoys a positive economic profit when:
A)the demand curve touches the average cost curve at the profit-maximizing level of output. 
B)the marginal revenue curve has a negative intercept on the ordinate axis. 
C)the average revenue curve lies below the average cost curve at the profit-maximizing level of output. 
D)the marginal cost is declining at the profit-maximizing level of output. 
E)the average revenue curve lies above the average cost curve at the profit-maximizing level of output.

Quizplus · Accepted Answer

A firm enjoys a positive economic profit when the average revenue curve lies above the average cost curve at the profit-maximizing level of output. This means that the firm is able to charge more for its products or services than what they cost to produce. Thus, the difference between the price and the cost is the economic profit. This condition is known as the "price exceeds average cost" rule for profit maximization.

The Table Given Below Reports the Marginal Revenue and Marginal