The following table shows a profit-maximizing producer's marginal costs.The firm is operating in a perfectly competitive market and has fixed costs of $500.

-Refer to the above information to answer this question.If the price is $350,what is the optimal output and what is the profit or loss?

Question

The following table shows a profit-maximizing producer's marginal costs.The firm is operating in a perfectly competitive market and has fixed costs of $500.
 
-Refer to the above information to answer this question.If the price is $350,what is the optimal output and what is the profit or loss?

Quizplus · Accepted Answer

To determine the profit-maximizing output, we need to find the level of output where marginal cost equals price. In this case, the MC curve intersects the price of $350 at an output level of 6. At this output level, the total revenue is 6 x $350 = $2,100; total cost is $500 + (6 x $200) = $1,700. Thus, the profit is $2,100 - $1,700 = $400, which means the answer is D.

The Following Table Shows a Profit-Maximizing Producer's Marginal Costs