Figure 7.5 Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7.5.If the market price is $20,the firm's profit-maximising output is -

Question

Figure 7.5  Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7.5.If the market price is $20,the firm's profit-maximising output is -

Quizplus · Accepted Answer

To determine the profit-maximizing output, the firm will produce where its marginal cost equals the market price, which is $20 in this case. From the graph, the point where the marginal cost curve intersects with the market price line corresponds to an output of 1350 units. At this quantity, the firm's total revenue is $27,000 (1350 units x $20), while its total cost is $22,500 (1350 units x $15), resulting in a profit of $4,500. Any higher or lower output would result in a lower profit. Therefore, the best choice is C) 1350 units.

Figure 75 Figure 7