Table 12-3
Table 12-3 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units.
-Refer to Table 12-3.If the market price is $45 the firm will produce

Question

Table 12-3
  Table 12-3 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units.
-Refer to Table 12-3.If the market price is $45 the firm will produce

Quizplus · Accepted Answer

To determine the profit-maximizing level of output for a perfectly competitive firm, it is necessary to compare the market price with the firm's marginal cost. According to the table, the marginal cost of producing 60 units is $45, which is equal to the market price, indicating that the firm is maximizing profit at this output level. However, since the firm can only increase its output in batches of 20 units, the next feasible output level above 60 units is 80 units. Therefore, the firm will produce 80 units, which will generate a profit of ($45 - $25) x 80 = $1,600. At any higher or lower level of output, the firm will earn a smaller profit or incur a loss.

Table 12-3 Table 12-3 Shows the Short-Run Cost Data of Data