Refer to the following figure:

The graph on the left shows long-run average and marginal cost for a typical firm in a perfectly competitive industry. The graph on the right shows demand and long-run supply for an increasing-cost industry.
-What output will the firm produce?

Question

Refer to the following figure:
  
The graph on the left shows long-run average and marginal cost for a typical firm in a perfectly competitive industry. The graph on the right shows demand and long-run supply for an increasing-cost industry.
-What output will the firm produce?

Quizplus · Accepted Answer

The firm will produce where marginal cost equals marginal revenue, which is at an output of 400 (where the marginal cost curve intersects the marginal revenue curve). At this output, the firm will also be producing at the minimum point on its long-run average cost curve, ensuring the highest possible profits.

Refer to the Following Figure