Suppose the market for apples is perfectly competitive. The short-run average to

Question

Suppose the market for apples is perfectly competitive. The short-run average total cost and marginal cost of growing apples for an individual grower are illustrated in the figure to the right. Assume that the market price for apples is $6.00 per box. What is the profit-maximizing quantity for apple growers to produce? boxes. At this level of output profit will be $ (Enetr your response as an integer.) Apple growers will earn positive economic profit in the short run at any market price above $ per box. (Enter your response as an integer.)

Explanation / Answer

A competitive firm will equate his price with MC for profit maximization.

So, P = MC = 6, where quantity = 75

Profit = quantity x (P - ATC) = 75 x (6 - 3) = 225

Economic profit > 0 whenever P > Minimum point of ATC, that is P > 2.5

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