Exhibit 8-20

-Exhibit 8-20 shows the cost schedule for 'No#2 widget factory'.We know that the market for widgets is perfectly competitive,and the widgets are selling for $10 each.How many widgets should the factory produce to maximize its profit?

Question

Exhibit 8-20
 
-Exhibit 8-20 shows the cost schedule for 'No#2 widget factory'.We know that the market for widgets is perfectly competitive,and the widgets are selling for $10 each.How many widgets should the factory produce to maximize its profit?

Quizplus · Accepted Answer

To maximize profit, the factory should produce where marginal cost (MC) equals marginal revenue (MR). In this case, we can see that the MC curve intersects with the MR curve at a quantity of 4. Therefore, the factory should produce 4 widgets to maximize its profit. At this quantity, the total cost is $45, and the total revenue is $40, resulting in a loss of $5. However, this is the maximum profit the factory can achieve given the current market conditions.

Exhibit 8-20 -Exhibit 8-20 Shows the Cost Schedule for 'No#2 Widget Factory'.We