The correct answer is: D. AC and AR curves cross each other.
Profit is the difference between total revenue (TR) and total cost (TC). TR is the total amount of money a firm receives from selling its goods or services. TC is the total amount of money a firm spends to produce its goods or services.
The AC curve is the average cost curve. It shows the average cost of producing each unit of output. The AR curve is the average revenue curve. It shows the average revenue a firm receives from selling each unit of output.
Profit is maximized when the AC curve intersects the AR curve at its minimum point. This is because at this point, the firm is producing at the level of output where the average cost of production is lowest. As a result, the firm is able to sell its goods or services at a price that is higher than its average cost of production, and it will therefore make a profit.
Here is a diagram that illustrates the concept:
[Diagram of AC and AR curves intersecting]
The AC curve is the blue curve, and the AR curve is the red curve. The two curves intersect at point A. This is the point where profit is maximized.
I hope this explanation is helpful! Let me know if you have any other questions.