The following table presents the total cost of production for various levels of output for a competitive firm:
What is the lowest price at which this firm might choose to operate?

Question

The following table presents the total cost of production for various levels of output for a competitive firm: 
What is the lowest price at which this firm might choose to operate?

Quizplus · Accepted Answer

The firm will choose to operate where marginal cost equals marginal revenue. Looking at the table, we can see that at an output level of 4, both marginal cost and marginal revenue are $3.00. At any output level below or above 4, either the marginal cost is higher than the marginal revenue or the marginal revenue is higher than the marginal cost. Therefore, the firm will choose to operate at an output level of 4 and charge a price of $3.00, which is the lowest price at which they can operate without incurring losses.

The Following Table Presents the Total Cost of Production for Various