-This profit-maximizing (loss-minimizing) firm produces a quantity of about _______ units.

Question

-This profit-maximizing (loss-minimizing)firm produces a quantity of about _______ units.

Quizplus · Accepted Answer

Without additional information about the firm's production function or cost structure, we can use the profit maximization rule of producing where marginal revenue (MR) equals marginal cost (MC). If the firm is minimizing losses, it will produce where MR equals minimum average variable cost (AVC). Based on the given information, we cannot determine the exact values of MR or AVC, but we can reason that the quantity produced should not be too high (i.e. not 100 or more) or too low (i.e. not 30 or less), since at those extremes it is unlikely that the firm can maintain profitability or minimize losses. Therefore, the best choice is likely around the middle of the range, which is 80 units.

-This Profit-Maximizing (Loss-Minimizing)firm Produces a Quantity of About _______ Units