Assuming a price was $2.00, how many units should this perfectly competitive firm produce and sell in order to maximize profits? $$\begin{array} { c c }
\text { Quantity } & \text { Total Cost } \
\hline 24 & \$ 24.00 \
25 & \$ 25.00 \
26 & \$ 26.50 \
27 & \$ 29.00 \
28 & \$ 33.50
\end{array}$$

Question

Assuming a price was $2.00, how many units should this perfectly competitive firm produce and sell in order to maximize profits? $$\begin{array} { c c } 
\text { Quantity } & \text { Total Cost } \
\hline 24 & \$ 24.00 \
25 & \$ 25.00 \
26 & \$ 26.50 \
27 & \$ 29.00 \
28 & \$ 33.50
\end{array}$$

Quizplus · Accepted Answer

To maximize profits, the firm should produce where marginal cost (MC) equals marginal revenue (MR). Here, MR is $2.00. The MC from 25 to 26 units is $1.50, and from 26 to 27 units is $2.50. Therefore, producing 26 units maximizes profit as MC is closest to MR without exceeding it.

Assuming a Price Was $2 A)24 B)25 C)26 D)27 E)28

Assuming a Price Was $2 A)24
B)25
C)26
D)27
E)28