Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B. FIGURE 9-4
-Refer to Figure 9-4.Given its total cost and revenue curves,Firm B should

Question

Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B.  FIGURE 9-4
-Refer to Figure 9-4.Given its total cost and revenue curves,Firm B should

Quizplus · Accepted Answer

Firm B should maximize its profits by producing the level of output where the slope of the TC curve is equal to the slope of the TR curve. This occurs at the point where the TC and TR curves intersect. At this point, the firm is earning zero economic profit, but it is covering all its variable and fixed costs. If the firm were to produce at a lower level of output, it would be incurring losses, and if it were to produce at a higher level of output, it would incur greater fixed costs and reduce its profits. Therefore, the optimal level of output for Firm B is the intersection point of the TC and TR curves.

Consider the Total Cost and Revenue Curves Shown Below,for Two