Use the figure to answer the following question(s).
Figure 9-4

Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?
A) go out of business since it cannot make a profit
B) produce an output of 3 million
C) produce an output of 5 million
D) produce an output of 6 million

Question

Use the figure to answer the following question(s).
Figure 9-4

Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?
A) go out of business since it cannot make a profit 
B) produce an output of 3 million 
C) produce an output of 5 million 
D) produce an output of 6 million

Quizplus · Accepted Answer

At a market price of $6, the firm can maximize its profit by producing an output of 5 million units, which is where marginal cost equals price. At any higher output level the marginal cost exceeds price, resulting in losses.

Use the Figure to Answer the Following Question(s)