Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The optimal choice occurs where total revenue equals total cost.
B
The optimal choice maximizes the area between total revenue and total cost.
C
Any point where total revenue is greater than total cost should be considered optimal.
D
The optimal choice is determined by the point where marginal cost equals marginal revenue.
E
Increasing total revenue will always lead to higher profits regardless of total cost.
Understanding the Answer
Let's break down why this is correct
Answer
To find the optimal choice regarding total revenue and total cost, you need to understand that the goal is to maximize profit. Profit is calculated by subtracting total costs from total revenue. When you analyze different options, look for the point where total revenue is highest while total costs are still manageable. For example, if you are running a lemonade stand, you want to find the price and quantity of lemonade that brings in the most money after covering the costs of lemons, sugar, and cups. By balancing these factors, you can make the best decision for your business.
Detailed Explanation
The optimal choice is found where the extra revenue from selling one more unit equals the extra cost of making that unit. Other options are incorrect because Some may think that total revenue must equal total cost for the best choice; People might believe maximizing the area between revenue and cost is key.
Key Concepts
Optimal Choice in Economics
Total Revenue and Total Cost
Marginal Analysis
Topic
Finding Optimal Choices
Difficulty
hard level question
Cognitive Level
understand
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