Table 7-3
Table 7-3 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 7-3.If the market price is $45 the firm will produce
A) 60 units.
B) 80 units.
C) 100 units
D) 120 units

Question

Table 7-3
  Table 7-3 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 7-3.If the market price is $45 the firm will produce
A) 60 units. 
B) 80 units. 
C) 100 units 
D) 120 units

Quizplus · Accepted Answer

To determine the profit-maximizing output level, we need to find the quantity where marginal cost (MC) equals marginal revenue (MR) which is the market price in this case. 
At output level of 80 units, MC = $45 and MR = $45. 
At any higher output level, MC is greater than MR, indicating that the firm would incur losses. 
Therefore, the best choice for the firm is to produce 80 units.

Table 7-3 Table 7-3 Shows the Short-Run Cost Data of Data