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AP Microeconomics Practice Quiz: Profit Maximization

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 7 questions to check your progress.

Question 1 of 7

According to the provided text, what is the primary assumed goal of a firm when it decides on its level of output?

All Questions (7)

According to the provided text, what is the primary assumed goal of a firm when it decides on its level of output?

A) To minimize marginal cost

B) To maximize its profits

C) To maximize marginal revenue

D) To produce the largest possible quantity

Correct Answer: B

The text explicitly states, 'Firms are assumed to produce output to maximize their profits...'

To determine the profit-maximizing level of production, a firm must compare which two key metrics?

A) Total output and total profit

B) Price and quantity

C) Marginal revenue and marginal cost

D) Total revenue and total cost

Correct Answer: C

The content specifies that firms maximize profits 'by comparing marginal revenue and marginal cost.'

The profit-maximizing rule guides a firm to produce at the level of output where:

A) Marginal revenue is at its highest point.

B) Marginal cost is at its lowest point.

C) Marginal revenue is equal to marginal cost.

D) Marginal revenue is significantly greater than marginal cost.

Correct Answer: C

The profit-maximizing rule is defined by the point where the marginal revenue from producing one more unit equals the marginal cost of producing that unit. This is the optimal point found by 'comparing' the two values.

If a firm is producing at a quantity where the marginal revenue of the last unit is greater than its marginal cost, what should the firm do to maximize profit?

A) Increase its level of production.

B) Decrease its level of production.

C) Keep production at the current level.

D) Stop production entirely.

Correct Answer: A

When marginal revenue exceeds marginal cost, producing an additional unit adds more to revenue than it adds to cost, thereby increasing overall profit. The firm should continue to increase production until MR = MC.

A firm discovers that for the last unit it produced, the marginal cost was greater than the marginal revenue. To move towards its profit-maximizing level of output, the firm should:

A) Increase its output to lower the average cost.

B) Decrease its output.

C) Maintain its current level of output.

D) Increase its price.

Correct Answer: B

If the last unit cost more to produce (MC) than it generated in revenue (MR), that unit caused a decrease in total profit. The firm should reduce production to a level where MR = MC.

On a graph showing a firm's marginal cost and marginal revenue curves, the profit-maximizing level of production is found at the quantity where:

A) The marginal cost curve begins to increase.

B) The marginal revenue curve intersects the vertical axis.

C) The marginal cost and marginal revenue curves intersect.

D) The vertical distance between the two curves is greatest.

Correct Answer: C

The text states that the profit-maximizing rule can be defined using graphs. The intersection of the marginal revenue (MR) and marginal cost (MC) curves represents the point where MR = MC, which determines the profit-maximizing quantity of output.

The profit-maximizing level of production is best described as the output level where:

A) The cost of producing all units is minimized.

B) The revenue from selling all units is maximized.

C) The firm has produced every unit that adds more to revenue than it adds to cost.

D) The firm sells the greatest possible number of units.

Correct Answer: C

This is a conceptual definition of the profit-maximizing rule. A firm maximizes profit by producing up to the point where the marginal benefit (MR) equals the marginal cost (MC), meaning it has exhausted all opportunities for profitable production where MR > MC.