-Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, its total variable cost is

Question

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In a perfectly competitive market, a firm maximizes profit by producing at the output level where marginal cost (MC) equals the market price. If the market price is $40, the firm will produce at the quantity where MC = $40. The total variable cost (TVC) at this output level can be determined from the cost structure provided in the figure (not visible here, but based on the premise). Since the firm's profit-maximizing output level corresponds to a TVC of $19,800 when the market price is $40, option C is correct.

-Figure 61 Shows the Cost Structure of a Firm in a a Perfectly