ECONOMICS (CBSE/UGC NET)

ECONOMICS

PROFIT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which of the following does not illustrate the concept of profit maximisation?
A
MR=MC
B
The difference between TR and TC is the greatest
C
Economic profit is at least zero or greater
D
Total revenue is maximised.
Explanation: 

Detailed explanation-1: -Answer and Explanation: The correct answer is D. Profit maximization occurs where output is restricted below the point where the marginal social benefit of the last unit of production is just equal to the marginal social cost of making that unit.

Detailed explanation-2: -Revenue maximization is the theory that if you sell your wares at a low enough price, you will increase the revenue you bring in by selling a higher total volume of goods. However, maximized revenue does not equate with maximized profits, as you may have to sell your goods at a loss to get them off of your shelves.

Detailed explanation-3: -The profit maximization level of output can be attained by putting marginal revenue equal to the marginal cost.

Detailed explanation-4: -Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.

Detailed explanation-5: -The cost price p, must be equal to MC. The marginal cost must be non-decreasing at q0. For the enterprise to continue to manufacture in the short run, the cost price must be greater than the average variable cost (p > AVC), whereas in the long run, the cost price must be greater than the average cost (p > AC).

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