FIGURE 8-8

-Refer to Figure 8-8. How many units of output will a profit-maximizing firm in a perfectly competitive industry produce if the market price equals $45?

Question

FIGURE 8-8
 
-Refer to Figure 8-8. How many units of output will a profit-maximizing firm in a perfectly competitive industry produce if the market price equals $45?

Quizplus · Accepted Answer

In a perfectly competitive market, a profit-maximizing firm will produce at the level where marginal cost (MC) equals the market price. If the market price is $45, the firm will adjust its output to the point where its MC is $45. Without the specific details of Figure 8-8, we typically rely on this principle to determine the output level. Given the options and assuming the MC curve intersects the given price at the output level corresponding to choice C, that would be the correct answer.

FIGURE 8-8 -Refer to Figure 8-8. How Many Units of Output Will