Table 12-1

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 12-1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?
A)It must fall.
B)It must rise to offset the increased cost.
C)It will remain the same.
D)The firm will shut down.

Question

Table 12-1
  
Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 12-1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?
A)It must fall. 
B)It must rise to offset the increased cost. 
C)It will remain the same. 
D)The firm will shut down.

Quizplus · Accepted Answer

The firm's profit-maximizing output level is determined by marginal cost and marginal revenue, not fixed costs. Since the price per unit and variable costs remain unchanged, the output level remains the same.

Table 12-1 Table 12-1 Shows the Short-Run Cost Data of a Perfectly