A manager seeking profit maximization will indeed focus on the point where the vertical distance between the total revenue (TR) curve and the total cost (TC) curve is greatest. This point represents the maximum profit, as profit is calculated as the difference between total revenue and total cost.
To visualize this:
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Total Revenue Curve (TR): This curve typically rises as the quantity sold increases, reflecting the idea that more sales lead to more revenue.
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Total Cost Curve (TC): This curve also typically rises, showing that costs increase with the production of more goods.
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Profit Maximization Point: The point at which the TR curve is farthest from the TC curve represents the highest profit level. At this point, the manager would compare marginal revenue (MR) and marginal cost (MC) to determine optimal production levels.
In summary, the manager will select the quantity where the difference between the total revenue and total cost is maximized, ensuring the greatest profitability for the firm.