This graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. If mushrooms sell for $40 per bushel, and Moe chooses the profit-maximizing quantity, he will:

Question

This graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive.  If mushrooms sell for $40 per bushel, and Moe chooses the profit-maximizing quantity, he will:

Quizplus · Accepted Answer

The profit-maximizing quantity is where marginal cost (MC) equals marginal revenue (MR), which in this case is where they intersect at 10 bushels. At this quantity, Moe's average total cost (ATC) is $35 per bushel. Since the price is $40 per bushel, Moe will earn a positive profit of $5 per bushel. Therefore, the best choice is option C, earn positive profit.

This Graph Shows the Cost Curves for Moe's Mushroom Gathering