The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.

-Refer to the figure above.What is the total cost of the firm when it produces the profit-maximizing level of output?
A) $60
B) $120
C) $180
D) $240

Question

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.
 
-Refer to the figure above.What is the total cost of the firm when it produces the profit-maximizing level of output?
A) $60 
B) $120 
C) $180 
D) $240

Quizplus · Accepted Answer

The profit-maximizing level of output is where marginal cost (MC) equals marginal revenue (MR), which in a perfectly competitive industry is equal to the market price (P). 
In the graph, we can see that the MC curve intersects the ATC curve at a quantity of 6. At this quantity, the ATC is $30 and the P is also $30. 
Therefore, the total cost of producing 6 units of output is: 
Total cost = Quantity of output x ATC 
Total cost = 6 x $30 
Total cost = $180 
So the correct answer is option C.

The Following Figure Shows the Marginal Cost Curve and the Average