Refer to the table shown. If the market price is $4, a perfectly competitive profit-maximizing firm will produce: $$\begin{array} { | c | c | }
\hline \text { Quantity } & \text { Marginal Cast } \
\hline 1 & \$ 3 \
\hline 2 & 5 \
\hline 3 & 7 \
\hline 4 & 9 \
\hline
\end{array}$$
A) 1 unit of output.
B) 2 units of output.
C) 3 units of output.
D) 4 units of output.

Question

Refer to the table shown. If the market price is $4, a perfectly competitive profit-maximizing firm will produce: $$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Marginal Cast } \
\hline 1 & \$ 3 \
\hline 2 & 5 \
\hline 3 & 7 \
\hline 4 & 9 \
\hline
\end{array}$$
A) 1 unit of output.
B) 2 units of output.
C) 3 units of output.
D) 4 units of output.

Quizplus · Accepted Answer

A perfectly competitive firm maximizes profit by producing where marginal cost equals market price. At 1 unit, the marginal cost ($3) is less than the market price ($4), so the firm will produce 1 unit. At 2 units, the marginal cost ($5) exceeds the market price, so the firm will not produce more than 1 unit.

Refer to the Table Shown A) 1 Unit of Output