To Maximize Profits, a Firm Should Always Produce the Level

question 349

Multiple Choice

To maximize profits, a firm should always produce the level of output where

• A) marginal cost equals average total cost.
• B) average total cost equals price.
• C) marginal cost equals marginal revenue.
• D) marginal revenue equals price.

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Definitions:

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by government to protect consumers.

Demand Curve

An image that graphically shows the relationship between an item's selling price and the quantities that consumers are interested in buying.

Consumer Surplus

The economic benefit consumers receive when they pay less for a product or service than what they were willing to pay.

Total Surplus

The total societal benefits from trading a good or service, encapsulated by the combination of consumer surplus and producer surplus in a market.