Industry profits are maximized in the figure below: A) only at point Q^M₁. B) only at point Q^M₂. C) on the line segment joining points Q^M₁ and Q^M₂. D) at the point where r₁ = r₂.

Question

Quizplus · Accepted Answer

Industry profits are maximized at the point where the marginal revenue (MR) curve intersects the marginal cost (MC) curve. In the given figure, this occurs at points Q^M₁ and Q^M₂. However, industry profits are maximized not just at a single point, but over a range of outputs since the profit-maximizing output level depends on the prevailing market conditions. The line segment joining these two points represents the range of outputs at which the industry can earn profits over and above its costs. Therefore, the best choice is option C, which identifies the range of output levels where industry profits are maximized.

Industry Profits Are Maximized in the Figure Below