The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.2
MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Refer to Figure 10.2. What is the profit-maximizing price and output level?

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.2
  MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Refer to Figure 10.2. What is the profit-maximizing price and output level?

Quizplus · Accepted Answer

The profit-maximizing output level occurs where marginal revenue (MR) = marginal cost (MC). In the given graph, this occurs at an output level of 20 units. At this output level, the corresponding price is $50, which is read off the demand curve. At this output level, the average total cost (ATC) curve intersects the demand curve. Therefore, the economic profit is (50 - 20) x 20 = $600. Option C is the only answer option that matches these values.

The Figure Given Below Shows the Revenue and Cost Curves