11/5/2017 11:55 PM 4 41.6/100 11/5/2017 01:02 PM Gradeboo Calculator Question 20
ID: 1103639 • Letter: 1
Question
11/5/2017 11:55 PM 4 41.6/100 11/5/2017 01:02 PM Gradeboo Calculator Question 20 of 40 Sapling Learning The graph on the right presents the costs and revenue for a purely competitive firm, where the market Prolt o this in do per unit of output Use this intormation to détermihe the proftimaximizing output and 1. What is the profit-maximizing output of this purely competitive firm? ( answer to the nearest whole number.) 750 700 650 Marginal Cost Number 60arginal Reve 550 500 450 400 350 300 250 200 150 100 50 | Units of Output Total Cost 2. What is the maximum level of profits for this purely competitive firm? (Round your answer to the nearest whole number Average Variable Cost Number 0123 456 7 89 10 11 12 13 14 15 Units of Outpt about us careers privacy policyterms of use contact us helpExplanation / Answer
1) Purely competitive firm faces a horizontal demand curve; it can sell as much as it wishes at the market price. The firm chooses its profit maximizing output level by setting marginal cost equal to the market price.
The profit maximizing output = 12 units of output.
____________________________________________________________________________-
2) Total profit = ( P - ATC ) * profit maximizing output
Total profit = ( $ 600 - $450) * 12 units
Total profit = $ 1800
_________________________________________________________________________
3) The correct choice is: the quantity where marginal revenue equals marginal cost & the quantity where price equals marginal cost
Explanation : - At the profit maximizing level of output, marginal revenue and marginal cost are exactly equal. For profit maximization, a perfectly competitive firm will produce where price equals marginal cost.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.