Why does a firm in perfect competition produce the quantity at which marginal cost equals price? In a perfectly competitive market, the price of a handsaw is $25. When a firm maximizes its profit, it produces 6 handsaws a day. Draw the marginal revenue curve. Label it. Draw the marginal cost curve that illustrates the profit-maximizing output. Label it. Draw a point at the profit-maximizing output and price. A firm produces the quantity at which marginal cost equals price because when marginal cost is greater than price, the firm O A. can increase economic profit by producing 1 less handsaw O B. is maximizing economic profit O C. is at its shutdown point O D. can increase economic profit by producing 1 more handsaw 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- 0- Price (dollars per handsaw) 0 8 Quantity (handsaws per day) >>> Draw only the objects specified in the question. 10

Why does a firm in perfect competition produce the quantity at which marginal cost equals price? In a perfectly competitive market, the price of a handsaw is $25. When a firm maximizes its profit, it produces 6 handsaws a day. Draw the marginal revenue curve. Label it. Draw the marginal cost curve that illustrates the profit-maximizing output. Label it. Draw a point at the profit-maximizing output and price. A firm produces the quantity at which marginal cost equals price because when marginal cost is greater than price, the firm O A. can increase economic profit by producing 1 less handsaw O B. is maximizing economic profit O C. is at its shutdown point O D. can increase economic profit by producing 1 more handsaw 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- 0- Price (dollars per handsaw) 0 8 Quantity (handsaws per day) >>> Draw only the objects specified in the question. 10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Why does a firm in perfect competition produce the quantity at which marginal cost
equals price?
In a perfectly competitive market, the price of a handsaw is $25. When a firm maximizes
its profit, it produces 6 handsaws a day.
Draw the marginal revenue curve. Label it.
Draw the marginal cost curve that illustrates the profit-maximizing output. Label it.
Draw a point at the profit-maximizing output and price.
A firm produces the quantity at which marginal cost equals price because when marginal
cost is greater than price, the firm
O A. can increase economic profit by producing 1 less handsaw
O B. is maximizing economic profit
OC. is at its shutdown point
O D. can increase economic profit by producing 1 more handsaw
50-
45-
40-
35
30-
25-
20-
15-
10-
5
0-
0
Price (dollars per handsaw)
10
Quantity (handsaws per day)
>>> Draw only the objects specified in the question.

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Step 1: Solve for Q1

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Step 2: Solve for Q2

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Step 3: Draw the MC curve that illustrates the profit-maximizing output

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Step 4: Draw a point at the profit-maximizing output and price

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