If the market price is $5 and you are currently producing at a level where average total cost is $3 and falling, you should:

Question

Quizplus · Accepted Answer

Producing where MR = MC will maximize profit. At a market price of $5, if average total cost is $3 and falling, it means marginal cost is below $3 and likely falling as well. Therefore, producing where MR = MC (i.e., producing until marginal cost equals $5) will result in a profit margin of at least $2 per unit.

If the Market Price Is $5 and You Are Currently