Figure 20A

-In the situation of asymmetric information shown in Figure 20A, the firm's dominant strategy is to produce at:

Question

Figure 20A

-In the situation of asymmetric information shown in Figure 20A, the firm's dominant strategy is to produce at:

Quizplus · Accepted Answer

At point B, the firm produces where marginal cost equals marginal revenue, which maximizes its profits given the demand curve. At point A, the firm would produce at a lower quantity and incur lower profits. At point C, the firm would produce at a higher quantity, but at a lower price, resulting in lower profits. Point 0 is not a feasible production quantity.

Figure 20A -In the Situation of Asymmetric Information Shown in Figure 20A