A profitmaximizing firm should continue to increase producti

A profit-maximizing firm should continue to increase production of a good until:

A) net benefits are maximized.

B) total benefits are maximized.

C) profits are zero.

D) profits are positive.

Solution

A firm maximizes its profit when it produce that level of output at which marginal cost is equal to marginal revenue or difference between total revenue or total benefits and total cost is at maximum.

Difference between total revenue or total benefits and total cost is referred to as net benefits.

So, a firm maximizes its profits when it produce that level of output at which its net benefits are maximized.

Thus, a profit maximizing firm should continue to increase production of a good until net benefits are maximized.

Hence, the correct answer is option (A).