You are running a business in a perfectly competitive market. Your product sells for $5 and your marginal costs rise as output rises. (a) If the cost of producing another unit of output is $4, what should you do? What will happen to your profit? (b) If the cost incurred from your last unit of output produced is $6, what has happened to your profit? What should you do about this? (c) What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?
You are running a business in a perfectly competitive market. Your product sells for $5 and your marginal costs rise as output rises. (a) If the cost of producing another unit of output is $4, what should you do? What will happen to your profit? (b) If the cost incurred from your last unit of output produced is $6, what has happened to your profit? What should you do about this? (c) What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You are running a business in a
(a) If the cost of producing another unit of output is $4, what should you do? What will happen to your profit?
(b) If the cost incurred from your last unit of output produced is $6, what has happened to your profit? What should you do about this?
(c) What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?
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