Answer to Question #91696 in Macroeconomics for toyosi

Question

Total profit is maximised where:

A. TR equals TC B. TR and TC curves are parallel C. TR and TC curves are parallel and TC exceeds TR D. TR and TC curves are parallel and TR exceeds TC E. none

Answer 1

Since total profit (TP) = TR - TC, we have to maximize the difference between TR and TC to maximize the TP. A maximum profit is possible under following condition:

1. The distance between TR and TC curves is the biggest ( it's possible when curves are parallel)
2. TR > TC (so the TR curve has to exceed TC curve)

Answer: D