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 figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profit-maximizing output level?

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 figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profit-maximizing output level?

Quizplus · Accepted Answer

In a perfectly competitive market, the profit-maximizing output level is determined by where marginal cost equals marginal revenue. An increase in fixed costs does not affect marginal cost, so the output level remains the same.

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