Suppose you are a perfectly competitive firm producing computer memory chips. Your production capacity is 1000 units per year. Your marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000 if production is positive and $0 if you shut down. What are your profit-maximizing levels of production and profit if the market price is ( a ) $5 per chip, ( b ) $15 per chip, and ( c ) $25 per chip? For case ( b ), explain why production is positive even though profits are negative?
Suppose you are a perfectly competitive firm producing computer memory chips. Your production capacity is 1000 units per year. Your marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000 if production is positive and $0 if you shut down. What are your profit-maximizing levels of production and profit if the market price is ( a ) $5 per chip, ( b ) $15 per chip, and ( c ) $25 per chip? For case ( b ), explain why production is positive even though profits are negative?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose you are a
is 1000 units per year. Your marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000 if
production is positive and $0 if you shut down. What are your profit-maximizing levels of production and
profit if the market
why production is positive even though profits are negative?
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