The above table summarizes the marginal cost of production at various quantity levels for a perfectly competitive firm.
-Refer to the table above. The perfectly competitive firm has a random demand with a 50 percent chance of being $6 and a 50 percent chance of being $8. What quantity should the firm produce to maximize its expected profit?

Question

Quizplus · Accepted Answer

The firm should produce 120 units to maximize its expected profit. At this quantity, the firm's expected revenue is $720 (0.5 x $6 + 0.5 x $8), and its expected total cost is $600 (120 x $5). Therefore, the firm's expected profit is $120.

The Above Table Summarizes the Marginal Cost of Production at Various