The price of a firm's product is $6 and the firm faces a constant marginal cost of $4 that is equal to its (constant)average total cost. If the firm does not sell a unit of its product on the day it was produced, it is sold in a secondary market for a price of $3. If the firm does not sell a unit of its product on the day it was produced, there is a ________ of _______per unit not sold.

Question

Quizplus · Accepted Answer

If the firm does not sell a unit of its product on the day it was produced, it faces a loss of $2 per unit not sold. This is because the firm incurs a cost of $4 to produce the unit, but only receives $3 by selling it in the secondary market. Therefore, the firm should aim to sell all units produced on the day in order to avoid this loss.

The Price of a Firm's Product Is $6 and the Firm