Economics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 1

FIGURE 10.3 Short-run profit maximization for a purely competitive firm. The MR = MC output enables the purely competitive firm to maximize profits or to minimize In this case MR (= P in pure competition) and MC are equal at an output Q of 9 units. There, P exceeds the average total cost A = $97.78, so the firm realizes an economic profit of P ? A per unit. The total economic profit is represented by the green rectangle and is 9 × ( P ? A ).

Curve MR is horizontal because:
a. product price falls as output increases.
b. the law of diminishing marginal utility is at work.
c. the market demand for this product is perfectly elastic.
d. the firm is a price taker.