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,what is the firm's profit-maximising output?
A) 750 units
B) 1100 units
C) 1350 units
D) 1800 units

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,what is the firm's profit-maximising output?
A) 750 units 
B) 1100 units 
C) 1350 units 
D) 1800 units

Quizplus · Accepted Answer

To find the profit-maximizing output of the firm, we need to look at where the MC curve intersects the MR curve, which is at point E. From here, we can draw a vertical line down to the X-axis to find the corresponding quantity, which is approximately 1350 units. At this level of output, the firm's marginal cost is equal to the market price, so it will maximize its profit.

Figure 7-5 Figure 7-5 Shows Cost and Demand Curves