Question

When marginal profit is zero, Average profit: a) equals marginal profit. b) is positive. c) is zero. d) can be positive, negative, or zero.

Answer 1

Since the marginal profit is the derivatives of total profit. In other words it can be said that it is the additional profit by selling an additional unit of output. So it can be positive, zero or negative.

But the total profit is sum of all marginal profit. The total profit may be positive, negative or zero.

Since Average profit= Total profit/ Total quantity sold

Hence Average profit may be negative, positive or Zero.

Hence option d is the correct answer.

Option d; can be negative, positive or Zero.