Use the figure to answer the following question(s).
Figure 9-5
-The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?
A) output, 3; maximum profit, $3 loss
B) output, 5; maximum profit, zero
C) output, 5; maximum profit, $5
D) output, 6; maximum profit, $6

Question

Use the figure to answer the following question(s).
Figure 9-5 
-The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?
A) output, 3; maximum profit, $3 loss 
B) output, 5; maximum profit, zero 
C) output, 5; maximum profit, $5 
D) output, 6; maximum profit, $6

Quizplus · Accepted Answer

In a price-taker market, the firm should produce where marginal cost equals market price. If the market price is $3, the firm should produce 5 units to maximize profit, resulting in zero profit as total revenue equals total cost.

Use the Figure to Answer the Following Question(s)