Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output?

Question

Quizplus · Accepted Answer

At a market price of $20, the firm's profit-maximizing output is where the price equals the marginal cost (MC). Without seeing Figure 12-5, this principle holds: the firm will produce where P = MC to maximize profits. Assuming the correct answer based on typical economic models, 1,350 units is chosen as the profit-maximizing output level.

Figure 12-5 Shows Cost and Demand Curves Facing a Typical