In the diagram above, profit is maximized at the output level
Answer Details
In the diagram, profit is maximized at the output level "OL". This is the level of output where the marginal cost (MC) equals the marginal revenue (MR) and the difference between them is the greatest. At this level of output, the firm is producing the quantity where it can sell the product at the highest price while still covering all the costs of production, resulting in the highest profit possible. Any level of output beyond "OL" would result in diminishing marginal returns, which means that the cost of producing an additional unit would be greater than the revenue generated from selling that unit.
