Figure 12-5

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.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 12-5
  
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.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 where marginal cost equals marginal revenue, which is at an output level of 1,100 units. At this output level, average profit is ($8 - $2) / 2 = $6.

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