The image contains a table showing the total costs associated with varying levels of output produced by a perfectly competitive firm. Below is the transcription of the table:| Output | Total Cost ||--------|------------|| 0 | $1,400 || 1 | $1,600 || 2 | $2,000 || 3 | $2,600 || 4 | $3,500 || 5 | $4,800 |The accompanying text states: "Use the following table to answer the next question. The table shows the total costs associated with varying levels of output produced by a perfectly competitive firm."Question: "If the product sells for $800 a unit, the firm's profit-maximizing output is ______."

A market structure with lots of customers and sellers is called perfect competition. The market structure facilitates the sale of identical commodities at prices set by the market. Due to their tiny market shares, businesses are powerless to influence market prices. The enterprises also benefit from perfect market information and unrestricted entry and departure from the sector. Profit maximising quantity in a perfectly competitive firm is determined at the point where the marginal cost are equal to the marginal revenue. In the perfectly competitive market, price remains the same for every level of output and the marginal revenue is equal to the price of the good. The marginal revenue also remains the same for every output sold, therefore, marginal revenue is equal to $800. Marginal cost can be calculated as a difference between the total cost at two output levels. Output Total cost Marginal cost 0 $1400 1 1600 1600 - 1400 =$200 2 2000 2000-1600= $400 3 2600 2600-2000=$600 4 3500 3500-2600=$900 5 4800 4800-3500=$1300 From the above table, it is clear that the marginal cost is equal to $600, that is, equal to marginal revenue, when the output level is 3 units. Therefore, firm's profit maximizing output is 3 units.

Answered: If the product sells for $800 a unit,…

Business

Economics

If the product sells for $800 a unit, the firm's profit-maximizing output is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

What does zero economic profits in the long-run mean to the owner of a business operating in a perfect competitive market?
Consider the graph. What is the value of profit when this firm is maximizing profit? Enter the number below. P P*=$10 ATC* = $6 B A q*=10 MC ATC MR q = firm quantity
Find marginal profit when marginal revenue is $90 and marginal cost $50
Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit. True False
A profit-seeking firm should expand its output so long as: marginal revenue exceeds marginal cost price exceeds average total cost marginal cost is not rising average total cost is not rising
When would a profit-maximizing firm shut down in the short run?
What is the term for the minimum level of output a firm must produce to cover its variable costs in the short run? a) Shutdown point b) Marginal cost point c) Average cost point d) Total cost point
Calculate Marginal profit given that marginal revenue is two times that of marginal cost
Why is the existing firm experience will get normal profit in the long run?
At a university faculty meeting in 2012, a proposal was made to increase the housing benefits for new faculty to keep pace with the high cost of housing. What will likely be the long-run effect of this proposal?
Determine a firm’s profit-maximizing decision in the short run.
A profit-maximizing firm in the short run will expand output until marginal cost begins to rise until total revenue equals total cost until marginal cost equals average variable cost as long as marginal revenue is greater than marginal cost