Figure 9-5
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Question

Figure 9-5
  Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Quizplus · Accepted Answer

The firm's profit-maximizing output is where marginal cost (MC) equals marginal revenue (MR). In this case, when the market price is $20, the marginal revenue curve intersects the marginal cost curve at approximately 1,350 units. At this output level, the firm's ATC is $20, which means it earns zero profit. Any output level above or below this will result in negative profits or lower revenue. Therefore, the best choice is C) 1,350 units of output.

Figure 9-5 Figure 9-5 Shows Cost and Demand Curves Facing