Asşuming this firm maximizes profit, it will:a. Produce 0A at a price of PProduce OD at.a.price of PC. Incur a total cost of GC times 0C at point I.d Do all the above.

Answered: Asşuming this firm maximizes profit, it…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Asşuming this firm maximizes profit, it will:
a. Produce 0A at a price of P
Produce OD at.a.price of P
C. Incur a total cost of GC times 0C at point I.
d Do all the above.

Expert Solution

Step 1

The perfectly competitive firm is a price taker and can sell any quantity of commodity at the market fixed price P. The best level of output for a competitive firm is at the point where P or MR equals MC and MC is rising. At this level of output the firm can either make a profit, break even or incur a loss. As long as P is higher than the ATC at the best level of output, the firm makes a profit.

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