The figure below shows the 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 $2.00,the firm's profit maximizing output is ________ and its maximum profit is ________.

Question

The figure below shows the 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 $2.00,the firm's profit maximizing output is ________ and its maximum profit is ________.

Quizplus · Accepted Answer

At $2.00 market price, the firm should produce the output where the marginal cost equals the market price, which is at 1,100 units. At this output level, the firm will earn zero economic profit as the average total cost, and the price is equal. Thus, the maximum profit will be zero. Therefore, the correct choice is C.

The Figure Below Shows the Cost Curves of a Firm