What defines the profit maximizing point A Where isoprofit l

What defines the profit maximizing point?

A Where isoprofit line is tangent with PPF

B Where isoprofit equals wages

C Any point above PPF

D Any point inside PPF but on an isoprofit line

Solution

Ans is A.

Isoprofit line means same profit which anyone can get by produving different level of quantities.

Thus if profit is maximised even at one point on isoprofit line then It shows locus of all profit maximisation points.

PPF shows different combination of two goods which an economy can product with given technology and resource.

Any points above PPF is unachievable and Any Point inside PPF denoted underutilisation of resources.

Thus profit is maximised when Isoprofit line os tangent to PPF.