Table 13-11
Suppose that a firm in a competitive market faces the following prices and costs:

-Refer to Table 13-11.Marginal revenue equals marginal cost when the firm produces

Question

Table 13-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 13-11.Marginal revenue equals marginal cost when the firm produces

Quizplus · Accepted Answer

The firm should produce where marginal revenue (MR) equals marginal cost (MC). In this case, that occurs at a quantity of 4 units, where both MR and MC are equal to $20. At any other quantity, producing more or less would result in either MR being greater than MC (for quantities less than 4 units) or MC being greater than MR (for quantities greater than 4 units), which would mean that the firm could increase profits by adjusting production levels. Therefore, producing 4 units is the best choice for the firm.

Table 13-11 Suppose That a Firm in a Competitive Market Faces the Faces