Question

. The optimal level of output may be defined as that level of output where a. average benefit exceeds average cost by the greatest amount. b. total benefit equals total cost. c. marginal benefit exceeds marginal cost by the greatest amount. d. the marginal benefit of the last unit purchased equals its marginal cost. e. it is impossible to define optimal in any meaningful way.

Answer 1

The optimal level of output may be defined as that level of output where the marginal benefit of the last unit purchased equals its marginal cost.

Explanation:

short term profits are maximized at the optimum production level. it is the output where the marginal revenue derived from the last unit sold equals to the marginal cost of the product to produce it.

Marginal costs vary with the production at each level and at various time periods where as some costs are fixed. So marginal costs are also referred as variable costs. Many companies have marginal cost equal to average costs.