The figure below shows cost curves of a firm in a competitive market. The firm always makes the choice to maximize its profit.

-Refer to the figure above.If the market price of the product is $3.25,what is the firm's total cost?

Question

The figure below shows cost curves of a firm in a competitive market. The firm always makes the choice to maximize its profit.
 
-Refer to the figure above.If the market price of the product is $3.25,what is the firm's total cost?

Quizplus · Accepted Answer

At a price of $3.25, the firm will produce at the output level where marginal cost equals price, which is 1,000 units in this case. The total cost at this output level is found by looking at the vertical intercept of the marginal cost curve, which is $2.70 per unit. Therefore, total cost = $2.70 per unit x 1,000 units = $2,700.

The Figure Below Shows Cost Curves of a Firm in a Competitive