Figure: Revenues, Costs, and Profits III for Tomato Producers
(Figure: Revenues, Costs, and Profits III for Tomato Producers) Look at the figure Revenues, Costs, and Profits III for Tomato Producers.The market for tomatoes is perfectly competitive, and an individual tomato farmer faces the cost curves shown in the figure.If the market price of a bushel of tomatoes is $14, the farmer's profit-maximizing output is bushels.

Question

Quizplus · Accepted Answer

The profit-maximizing output for a perfectly competitive firm is where marginal cost (MC) equals marginal revenue (MR), which is shown as point Q in the figure. At point Q, the farmer produces 4 bushels of tomatoes, where the MC curve intersects with the MR curve. At this level of output, the price (P) also equals $14, which is greater than the average variable cost (AVC) of production. Thus, the farmer earns a positive profit ($6 per bushel) at this level of output. Producing either more or less than 4 bushels would result in a lower profit or a loss. Therefore, the best choice is C) 4.