If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000, then if all markets are perfectly competitive, how many cars can be made from the last ton of steel used by a profit-maximizing firm?
A)1/3 car
B)1/2 car
C)1 car
D)1.5 cars

Question

Quizplus · Accepted Answer

If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000, then the marginal cost of steel per car is $15,000. A profit-maximizing firm will produce where marginal cost equals marginal revenue. Therefore, the firm will produce one car from every two tons of steel, or 1/2 car from the last ton of steel.

If a Ton of Steel Sells for $15,000 and a Car