The following figure depicts a specific firm's production with respect to the number of machine used.

-Refer to the table above.If the rental price of machines is $180 per day and the firm decides to use 3 machines,what must be the value of a unit of output?

Question

The following figure depicts a specific firm's production with respect to the number of machine used.
 
-Refer to the table above.If the rental price of machines is $180 per day and the firm decides to use 3 machines,what must be the value of a unit of output?

Quizplus · Accepted Answer

To determine the value of a unit of output, we need to find the point where Marginal Cost (MC) intersects Marginal Revenue (MR), which gives us the profit-maximizing quantity of output (Q*). At this quantity, the value of a unit of output is equal to the price the firm can charge (P*).

From the table, we can see that when the firm uses 3 machines, Q* is 6 units. At Q*=6, MC=$120 and MR=$180, which means P*=MR=$180. Therefore, the value of a unit of output is $180/6=$30.

Therefore, the best choice is C.

The Following Figure Depicts a Specific Firm's Production with Respect