Figure 16-3
-Refer to Figure 16-3.How much cost per unit could this firm save by producing the efficient level of output rather than the profit-maximizing level of output?

Question

Figure 16-3 
-Refer to Figure 16-3.How much cost per unit could this firm save by producing the efficient level of output rather than the profit-maximizing level of output?

Quizplus · Accepted Answer

The efficient level of output is where marginal cost equals marginal revenue (MC=MR). This occurs at a quantity of 8 units in the graph. At this level of output, the cost per unit is $14. The profit-maximizing level of output occurs where marginal cost equals marginal revenue and the marginal cost curve intersects the marginal revenue curve from below (MC=MR, and the intersection point is to the left of the efficient level of output). This occurs at a quantity of 10 units in the graph, with a cost per unit of $16. Therefore, the cost per unit saved by producing the efficient level of output rather than the profit-maximizing level of output is $16 - $14 = $2.

Figure 16-3 -Refer to Figure 16-3.How Much Cost Per Unit Could This