A perfectly competitive firm has a random marginal cost with a 60 percent chance of a high marginal cost of $100 and a 40 percent chance of a low marginal cost of $90. What is the firm's expected marginal cost?

Question

Quizplus · Accepted Answer

The expected marginal cost is calculated by multiplying each marginal cost by its probability and summing the results: (0.6 * $100) + (0.4 * $90) = $60 + $36 = $96.

A Perfectly Competitive Firm Has a Random Marginal Cost with a 60