Campbell's sells used trailers, U, and new trailers, N. Its profits are given by Õ = 100N + 68U - 5N2 - 5U2 - 2NU. Campbell's maximum profit is

a. $455.
b. $588.
c. $620.
d. $495.
e. $640.

Total profit is maximized when

a. marginal profit equals average profit.
b. marginal profit equals zero.
c. average profit equals zero.
d. average profit is maximized.
e. marginal profit is greater than average profit.

If marginal revenue is less than marginal cost at every level of output, a profit maximizing firm should

a. produce when the difference between marginal revenue and marginal cost is greatest.
b. produce when total revenue is maximized.
c. produce when the difference between total revenue and marginal cost is maximized.
d. produce when the difference between average revenue and average cost is equal to 1.
e. not produce any output.

Solution Preview

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