Output(kg) 240 450 580 630
MR(N) 75 48 -40 -22
MC(N) 41 48 77 20

Given the table above, what is the firm's short-run profit maximizing output?

  • A 450kg
  • B 630kg
  • C 240kg
  • D 580kg
jamb 2005economics

The correct answer is A. 450kg

This is because the firm’s short-run profit-maximizing output is the level of output where marginal revenue (MR) is equal to marginal cost (MC) and the marginal cost curve is rising.

According to the table, this condition is satisfied at 450kg, where MR = MC = 48.

At any other output level, either MR is not equal to MC, or the marginal cost curve is falling, which implies that the firm can increase its profit by changing its output.

For example, at 240kg, MR > MC, which means that the firm can increase its profit by producing more.

At 580kg, MR < MC, which means that the firm can increase its profit by producing less.

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