Question

A profit maximum is least likely to occur when

• A. average total cost is minimized.
• B. marginal revenue equals marginal cost.
• C. the difference between total revenue and total cost is maximized.
• D. Maximum Variable cost

Hint:

Compare each option against the standard MR=MC profit-maximizing condition.

Answer 1

The Correct Option is D

Profit maximisation is defined by producing where Marginal Revenue equals Marginal Cost (\(MR=MC\)), which is also the exact output level where the gap between Total Revenue and Total Cost is widest.
Average Total Cost being minimised is a separate, real concept from cost-curve analysis, just not itself a defining condition of profit maximisation. "Maximum Variable Cost", on the other hand, isn't a recognised economic condition tied to profit maximisation at all, since a profit-maximising firm has no reason to try to maximise its variable cost.
That makes option 4 the condition least likely to be associated with a profit maximum.