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Figure: Costs and Profits for Tomato Producers
-(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____.

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Use the following to answer questions:
Figure: Costs and Profits for Tomato Producers 
-(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____.

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In a perfectly competitive market, the marginal revenue equals the market price. Therefore, if the market price increases from $18 to $20, the marginal revenue also increases. As a result, the profit-maximizing output will increase because the farmer will produce more to maximize profits at the higher price.

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