3.5 Profit Maximization

a. Define (using graphs or data as appropriate) the profit-maximizing rule. b. Explain (using a graph or data as appropriate) the profit-maximizing level of production.

• Firms are assumed to produce output to maximize their profits by comparing marginal revenue and marginal cost.
• Enduring understanding CBA-2: To determine the optimal level at which to pursue an activity whose total benefits exceed total cost, rational economic agents compare marginal benefits and marginal costs.