If the market price in a competitive market is $10, and a firm's marginal cost (MC) is given by MC = 0.50Q, where Q is units of output, this firm should produce 20 units of output to maximize profit.

Question

Quizplus · Accepted Answer

To maximize profit, a firm should produce where marginal cost equals marginal revenue (MR). In a competitive market, price equals MR. Therefore, the firm should produce where MC = MR = price.

MC = 0.50Q and price = $10 
0.50Q = 10 
Q = 20

So, the firm should produce 20 units of output to maximize profit.

If the Market Price in a Competitive Market Is $10