Refer to the table shown. If the market price is $6, 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 $6, 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 the market price. At 2 units, the marginal cost is $5, which is less than the market price of $6, but at 3 units, the marginal cost is $7, which is more than the market price. Therefore, the firm will produce 2 units.

Refer to the Table Shown A) 1 Unit of Output