Answer to Question #128223 in Microeconomics for Zhi Xuan Tan

Question

An investor looking at your cost and revenue diagram wants you to produce at the output level of Q1 because at that output level, the difference between price and average total cost is the greatest(ie the firm will be making the greatest profit for every unit it sells) Explain why Q1 cannot be the profit maximising output level.

(disclaimer: saying that some other Output level is the profit maximising output level is not necessary or sufficient to answer the question)

Answer 1

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