Final answer:
A business will produce the quantity where marginal cost meets marginal revenue to maximize its profits. This applies to both perfectly competitive firms and monopolists. Producing beyond this point, where marginal cost exceeds marginal revenue, would decrease profits.
Step-by-step explanation:
To determine the quantity a business will produce to maximize its profits, one must look at where marginal cost (MC) meets marginal revenue (MR). In both perfectly competitive and monopolistic market structures, businesses seek to maximize profit by producing the quantity where MR equals MC. This is because at this quantity, any additional unit produced would add more to revenue than it does to cost, thereby increasing profit. Once MR is less than MC, producing additional units would decrease profit.
In a perfectly competitive market, a firm will find that price equals both MR and MC at the profit-maximizing level of output. If the price is above the average cost, the firm will make a profit. For a monopolist, the profit-maximizing point can be found by a similar logic, adjusting for the ability to influence market price. In both cases, firms produce up to the point where MR = MC to maximize their profits.
Important Note: The options 'The highest point on its supply curve' and 'The lowest point on its supply curve' do not generally relate to profit maximization and can thus be disregarded. Additionally, 'Where marginal cost exceeds marginal revenue' indicates that the firm would be producing beyond the profit-maximizing point and should reduce output to increase profits.