Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9
-Refer to Figure 8.9. If the market price of hay falls to $18, then to maximize profits this farmer should produce
A) 350 bales of hay.
B) 500 bales of hay.
C) 750 bales of hay.
D) a level of output that is indeterminate from this information.

Question

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow.  Figure 8.9
-Refer to Figure 8.9. If the market price of hay falls to $18, then to maximize profits this farmer should produce
A) 350 bales of hay. 
B) 500 bales of hay. 
C) 750 bales of hay. 
D) a level of output that is indeterminate from this information.

Quizplus · Accepted Answer

The profit-maximizing output is where marginal cost equals marginal revenue. At a price of $18, the marginal revenue is $18. The marginal cost is $20 at an output of 350 bales of hay. Therefore, the profit-maximizing output is 350 bales of hay.

Refer to the Information Provided in Figure 8