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

Exercise 2

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 ).

At a price of $131 and 7 units of output:
A) MR exceeds MC, and the firm should expand its output.
B) total revenue is less than total cost.
C) AVC exceeds ATC.
D) the firm would earn only a normal profit.