JAMB Economics 2011 Paper

Concept:A producer reaches the optimum output where marginal revenue equals marginal cost.Explanation:In the diagram, point $S$ is the point where the $MC$ and $MR$ curves intersect.At point $S$, $MC = MR$.Before point $S$, $MR > MC$, so each extra unit produced adds more to revenue than to cost.After point $S$, $MC > MR$, so each extra unit produced adds more to cost than to revenue.Thus, profit is maximised at point $S$.Answer:The optimal point of production is $S$.