The Profit-Maximizing Rule of Production Is to Produce the Level

question 45

Essay

The profit-maximizing rule of production is to produce the level of output where price is equal to marginal cost.Since the marginal cost (MC) curve is U-shaped, the price line running horizontal to the X-axis intersects the MC curve at two points.How is the profit maximization rule applied in this case?

---

Definitions:

Salvage Value

The presumed end value of an asset following the completion of its useful life.

Straight-Line Method

A depreciation method that allocates an equal portion of the initial cost of an asset to each accounting period over its useful life.

Revised Depreciation

An updated calculation of an asset's depreciation expense, adjusted due to changes in estimates, useful life, or salvage value.

Useful Life

The estimated period that an asset is expected to be usable for its intended purpose.