FIGURE 9-1
-Refer to Figure 9-1. The diagram shows cost curves for a perfectly competitive firm. If the market price is P3, the profit-maximizing firm in the short run should
A) produce output A.
B) produce output F or shut down, as it doesnʹt matter which.
C) produce output D.
D) shut down because more profits could be earned in another industry.
E) produce output F.

Question

FIGURE 9-1
-Refer to Figure 9-1. The diagram shows cost curves for a perfectly competitive firm. If the market price is P3, the profit-maximizing firm in the short run should
A) produce output A. 
B) produce output F or shut down, as it doesnʹt matter which. 
C) produce output D. 
D) shut down because more profits could be earned in another industry. 
E) produce output F.

Quizplus · Accepted Answer

At price P3, the firm should produce where marginal cost (MC) equals the market price, which is typically at output F in a perfectly competitive market. This is where the firm maximizes its profit or minimizes its loss in the short run.

FIGURE 9-1 -Refer to Figure 9-1. the Diagram Shows Cost Curves for Curves