The price of a firm's product is $8 and the firm faces a constant marginal cost of $5 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 $2. 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

The firm incurs a cost of $5 to produce a unit. If it doesn't sell the unit on the day it was produced, it sells it for $2 in a secondary market. This means it recovers only $2 of the $5 cost, resulting in a loss of $3 ($5 cost - $2 revenue) per unit not sold on the day it was produced.

The Price of a Firm's Product Is $8 and the Firm