Suppose Atlas Publishing, a perfectly competitive firm, currently produces 2,000

Question

Suppose Atlas Publishing, a perfectly competitive firm, currently produces 2,000 maps per day at a total cost of $1,600. At its current level of output, Atlas is producing where the marginal revenue curve intersects a rising marginal-cost curve. Which of the following can be concluded about Atlas Publishing?

Select one: a. It should produce more to maximize profit. b. It should produce more to break-even. c. It is maximizing losses. d. It is maximizing profit. e. It should produce less to maximize profit.

Explanation / Answer

It is maximizing profit. The firm is producing at profit maximizing level of MR=MC. The revenues are maximized at this point and the firm should stop production.

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