Exhibit 8.5

-Refer to Exhibit 8.5,which shows the demand and the cost curves of a perfectly competitive firm.If the price-taking firm is currently producing 6 units,it should _____ to maximize profit in the short run.

Question

Exhibit 8.5
 
-Refer to Exhibit 8.5,which shows the demand and the cost curves of a perfectly competitive firm.If the price-taking firm is currently producing 6 units,it should _____ to maximize profit in the short run.

Quizplus · Accepted Answer

To maximize profit in the short run, a perfectly competitive firm should produce at the level where marginal cost (MC) equals marginal revenue (MR), which is also the price in perfect competition. Without seeing Exhibit 8.5, the correct answer typically involves adjusting production to the point where this equality is achieved. If the firm is advised to increase production to 12 units, it implies that at 6 units, the firm's MC is below the market price, and increasing output to 12 units would align MC with the market price, maximizing profit.

Exhibit 8.5 -Refer to Exhibit 8.5,which Shows the Demand and the Cost