According to marginal analysis, the highest level of profit will be earned when _____.
A) marginal profit is at its highest positive value
B) marginal profit is near zero
C) marginal profit is at its lowest negative value
D) total revenue is at its highest value
E) total revenue is zero
Ans: B) marginal profit is near zero
Profit is maximum when marginal revenue is equal to marginal cost or when the difference between marginal revenue and marginal cost is the least. Marginal profit is the difference between the marginal cost and marginal revenue and therefore, the profit is maximum when it is near zero.
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