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The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm's production plans: In order to maximize

The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm's production plans: "In order to maximize profits, it is essential that we operate at the minimum point of our average total cost curve."

If you were the CEO of the automaker, would you praise or chastise the manager?

  • Praise the manager. Profit maximization requires producing at the minimum of ATC.
  • Chastise the manager. Profit maximization requires producing where MR = ATC.
  • Chastise the manager. Profit maximization requires producing where MR = MC.

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