Below,the graph on the left shows long-run average and marginal cost for a typical firm in a perfectly competitive industry.The graph on the right shows demand and long-run supply for an increasing-cost industry. What output will the firm produce?

Question

Below,the graph on the left shows long-run average and marginal cost for a typical firm in a perfectly competitive industry.The graph on the right shows demand and long-run supply for an increasing-cost industry.  What output will the firm produce?

Quizplus · Accepted Answer

The firm will produce where marginal cost equals marginal revenue, which is at an output of 400 units. This is also the point where the long-run supply curve intersects the demand curve, ensuring that the firm is producing at a price that covers its average total cost.

Below,the Graph on the Left Shows Long-Run Average and Marginal