At What Point Does a Firm Maximize Profit

question 181

Multiple Choice

At what point does a firm maximize profit?

• A) The point at which marginal cost equals marginal revenue
• B) The point at which the firm sells its product at the highest price
• C) The breakeven point plus the adjusted marginal cost
• D) The point at which marginal profits equal marginal revenue
• E) The point at which marginal cost equals marginal profits

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Definitions:

Deadweight Loss

Deadweight loss is a loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable, often due to market failures, taxes, or subsidies.

Excise Tax

A tax levied on specific goods or services at purchase such as alcohol, tobacco, and gasoline.

Elastic

Describes a situation in which the demand for a product or service significantly changes in response to a change in its price.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.