Profit Maximization via AR - AC Analysis

Steps:

• Calculate profit per unit as average revenue (AR) minus average cost (AC) for each output level.
• Multiply profit per unit by output quantity to get total profit for each level.
• Compare total profits across 5, 10, 15, and 20 units.
• Select the output with the highest total profit.

Why D is correct:

• Total profit equals output × (AR - AC); at 20 units, this product is largest per the table data.

Why the others are wrong:

• A: At 5 units, total profit is lower due to smaller output despite possibly higher AR - AC.
• B: At 10 units, total profit is lower than at 20 units.
• C: At 15 units, total profit is lower than at 20 units.

Final answer: D