Discussion
In what situation, profit maximises :
Answer: A
Profit is maximised when the difference between total revenue and total cost is highest.
Profit is \(\pi = TR - TC\), so it is greatest where the vertical gap between the TR and TC curves (with TR above) is widest. At that output the slopes of the two curves are equal, which is the condition MR = MC.
The smallest gap does not maximise profit. TR below TC means a loss, and where the curves meet, profit is zero (break-even).
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