passwella.
Menu

JAMB Economics 1992 Question 19

Question 19

Market Structures

In the diagram above, the profit maximizing output is

Diagram for this question
  1. A.Q1 while I = AC and II = MC
  2. B.Q1 while I = MC and II = AC
  3. C.Q2 while I = MC and II = AC
  4. D.Q3 while I = AC and II = MC
Show the answer and explanation

Answer: B (Q1 while I = MC and II = AC)

Explanation

Curve I is steeper and passes through the lowest point of II, so I is MC and II is AC. Profit is maximised where MR cuts MC, at output Q1.