The point of maximum profit is the point at which the marginal cost equals the:

• A. marginal revenue
• B. average total cost
• C. total revenue
• D. average variable cost

Answer: (A)

Verified step by step guidance

1. Understand the concept of profit maximization in microeconomics: A firm maximizes profit by producing the quantity of output where the difference between total revenue and total cost is the greatest.
2. Recall the key condition for profit maximization: This occurs where marginal cost (MC) equals marginal revenue (MR). Marginal cost is the additional cost of producing one more unit, and marginal revenue is the additional revenue from selling one more unit.
3. Recognize why other options are not correct: Average total cost (ATC), total revenue (TR), and average variable cost (AVC) do not determine the profit-maximizing output directly because profit depends on the incremental changes, not averages or totals alone.
4. Express the profit maximization condition mathematically: Set \(\text{MC} = \text{MR}\) to find the output level where profit is maximized.
5. Use this equality to analyze or graph the firm's cost and revenue curves to identify the output quantity where \(\text{MC} = \text{MR}\), which is the point of maximum profit.