This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. According to the table shown,what is the market price?

Question

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.  According to the table shown,what is the market price?

Quizplus · Accepted Answer

In perfect competition, the market price is determined by the intersection of the industry's supply and demand curves. However, we can estimate the market price for this firm by looking at the marginal cost column in the table. At output level 4, the marginal cost is equal to $50, which means that the variable cost of producing an additional unit of output is $50. Therefore, the firm will only produce that unit of output if it can sell it for at least $50, otherwise, it would incur a loss. We can see that at output level 4, the total cost is $200 and the revenue is $250, which implies that the market price is at least $50. Based on this, the best choice is C.

This Table Shows the Total Costs for Various Levels of Output