The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit.

-Refer to Figure .If the firm produces 2,000 dolls per month when the market price is $4:

Question

The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit.

-Refer to Figure .If the firm produces 2,000 dolls per month when the market price is $4:

Quizplus · Accepted Answer

At a quantity of 2,000 dolls per month, the marginal cost curve intersects the market price curve at a point where the marginal cost is higher than the market price. This means that the firm will incur a loss because the cost of producing each additional unit is more than the revenue it generates from selling the product. Therefore, producing 2,000 dolls per month when the market price is $4 would not result in maximum profit or minimum cost on inputs, nor would it earn the highest revenue.

The Following Figure Shows the Marginal Cost Curve (MC) for a Firm