Under What Condition Are Profits Maximized

question 141

Multiple Choice

Under what condition are profits maximized?

• A) at the rate of output at which marginal revenue equals marginal cost
• B) at the output rate where marginal cost is greater than marginal revenue
• C) at the point at which the difference between total revenues and total costs is negative
• D) at the point at which the difference between price and quantity demanded is greatest

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Definitions:

Risk Aversion

This concept describes an investor's preference to minimize uncertainty or to avoid risk in their investment decisions.

Risk-Free Rate

An anticipated gain from an investment devoid of financial risk, frequently illustrated through the returns on state bonds.

Arbitrage

The simultaneous purchase and sale of an asset in different markets to exploit price differences for a risk-free profit.

Mispricing

The occurrence of an asset being priced either higher or lower than its intrinsic value due to market inefficiencies or errors in analysis.