9.3 Short-Run Decisions
Assume the following total cost schedule for a perfectly competitive firm.
TABLE 9-2
-Refer to Table 9-2.If the market price were $75,this perfectly competitive firm wishing to maximize its profits would
A)produce 2 units of output.
B)produce 6 units of output.
C)produce 5 units of output.
D)not produce because P

Question

9.3 Short-Run Decisions
Assume the following total cost schedule for a perfectly competitive firm.
  TABLE 9-2
-Refer to Table 9-2.If the market price were $75,this perfectly competitive firm wishing to maximize its profits would
A)produce 2 units of output. 
B)produce 6 units of output. 
C)produce 5 units of output. 
D)not produce because P < minimum of ATC. 
E)not produce because P < TFC.

Quizplus · Accepted Answer

At a price of $75, the firm should produce the quantity at which marginal cost equals price, which is 5 units of output. This is the level of output where the marginal cost curve intersects with the horizontal line at $75. At this level of output, the firm's total cost is $410, and its total revenue is $375, resulting in a loss. However, producing at any other level of output would result in an even greater loss. Therefore, the best choice for the firm is to produce 5 units of output.

9.3 Short-Run Decisions Assume the Following Total Cost Schedule for a Perfectly Competitive