Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 8.7.At price P₃, the firm would produce

Question

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₃, the firm would produce

Quizplus · Accepted Answer

At price P₃, the demand and marginal revenue curves intersect at point A which determines the profit-maximizing level of output as Q₃. This is where marginal cost (MC) intersects the marginal revenue (MR) curve. At any level of output below Q₃, the firm could increase profit by producing more. At any level of output above Q₃, the firm incurs a higher cost of production than the revenue earned, leading to a decrease in profit. Therefore, the answer is B.

Figure 87 Figure 8