In the diagram, the profit maximizing output is

  • A Q1 while 1 = AC and II = MC
  • B Q1, while l = MC and ll = AC
  • C Q2, while l = MC and ll AC
  • D Q3, while l = AC and ll = MC
jamb 1992economics

The correct answer is B. Q1, while l = MC and ll = AC

In the diagram, the profit-maximizing output is where the Marginal Cost (MC) curve intersects the Marginal Revenue (MR) curve.

This is the point where an additional unit of output will no longer generate more revenue than it costs to produce, maximizing profit.

Since the intersection of the MC and MR curves occurs at Q1, the correct answer is B. Q1, while l = MC and ll = AC. 

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