The TR curve of a firm intersects the TC curve at 150 units of output and 400 units of output. Which of the following levels of output would be the most preferable for the firm?

75 units

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160 units

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250 units

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390 units

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Solution

The correct option is C
250 units

From the question, it can be understood that the profit (TR-TC) is zero at 150 units and 400 units of output. 150 units correspond to the break-even point. For output levels less than 150 or greater than 400, the firm would incur losses. If the output levels is close to 150 or 400, profit would be minimal. From the given options, the optimum point is 250 units which should be near the profit maximization level.

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