Assuming a price was $2.00,how many units should this perfectly competitive firm produce and sell in order to maximize profits?

Question

Quizplus · Accepted Answer

In perfect competition, firms will produce at a quantity where marginal cost (MC) equals marginal revenue (MR) to maximize profits. Assuming the firm's marginal cost is constant at $1.50, the firm should produce where MR = MC = $1.50. 
If the price is $2, then the marginal revenue (MR) equals $2. 
Therefore, to maximize profits, the firm should produce and sell the quantity where MC = MR = $1.50, which is 26 units (since MC = $1.50 for all units beyond the 26th unit). Selling fewer than 26 units means the firm could increase profits by producing and selling additional units to match the demand at $2, while selling more than 26 units would mean that the cost of producing additional units (MC) exceeds the revenue they bring in (MR).

Assuming a Price Was $2