Questions: At which level of production does the company make the least profit? the first pair of cleats the second pair of cleats the third pair of cleats the fourth pair of cleats

At which level of production does the company make the least profit? the first pair of cleats the second pair of cleats the third pair of cleats the fourth pair of cleats
Transcript text: At which level of production does the company make the least profit? the first pair of cleats the second pair of cleats the third pair of cleats the fourth pair of cleats
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Solution

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Solution Steps

Step 1: Analyze the graph

The graph shows the marginal cost of producing each pair of cleats. Marginal cost is the additional cost incurred by producing one more unit of a good.

Step 2: Relate marginal cost to profit

Profit is maximized when marginal cost equals marginal revenue. We don't have marginal revenue information. However, we are looking for the point where profit is _minimized_. Profit is generally minimized when marginal cost is highest.

Step 3: Identify the highest marginal cost

The highest marginal cost on the graph is \$7, which corresponds to the production of the first pair of cleats.

Final Answer

The first pair of cleats

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