Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.In order to maximize profit,how much output should the firm produce?

Question

Quizplus · Accepted Answer

To maximize profit, the firm should produce where marginal cost (MC) equals marginal revenue (MR), which is at point A in the graph on the right. At this point, the firm would produce 50 units and charge a price of $20 per unit. This is the point where the firm's short run supply curve intersects with the market demand curve. Producing any less than 50 units would result in lost profit, while producing any more than 50 units would result in decreasing profit due to higher marginal costs. Therefore, the best choice is to produce 50 units.

Below,the Graph on the Left Shows the Short-Run Cost Curves