Figure 10.5

Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 10.5.The firm's manager suggests that the firm's goal should be to maximize average profit.In that case, what is the output level and what is the average profit that will achieve the manager's goal?

Question

Figure 10.5
  
Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 10.5.The firm's manager suggests that the firm's goal should be to maximize average profit.In that case, what is the output level and what is the average profit that will achieve the manager's goal?

Quizplus · Accepted Answer

To maximize average profit, the firm should produce at the output level where marginal cost equals marginal revenue, which is 1,100 units in this case. At this output level, the average profit is ($8 - $2) / 2 = $6.

Figure 10.5 Figure 10.5 Shows Cost and Demand Curves Facing a Typical