Based on the table showing total cost and total revenue for a competitive firm, at which output level does the firm maximize its profit?

• A. Where total cost is minimized
• B. Where total revenue is maximized
• C. Where the difference between total revenue and total cost is greatest
• D. Where total revenue equals total cost

Answer: (C)

Verified step by step guidance

1. Understand that profit is calculated as the difference between total revenue (TR) and total cost (TC), i.e., \(\text{Profit} = TR - TC\).
2. For each output level in the table, calculate the profit by subtracting the total cost from the total revenue: \(\text{Profit}_q = TR_q - TC_q\), where \(q\) is the output level.
3. Compare the profit values across all output levels to identify where the profit is the greatest.
4. Recognize that the output level where the difference between total revenue and total cost is greatest corresponds to the profit-maximizing output.
5. Note that minimizing total cost or maximizing total revenue alone does not guarantee maximum profit, and the point where total revenue equals total cost corresponds to zero profit (break-even point).