Asked by Darby Fischer on May 08, 2024
Verified
(Figure: The Perfectly Competitive Firm II) Use Figure: The Perfectly Competitive Firm II.If this firm's MR curve is MR1,the firm will maximize profit by producing _____ units of output,and its economic profit will be _____.
A) Q1;positive
B) Q2;negative
C) Q3;positive
D) Q4;negative
Economic Profit
The profit or loss that a company makes, calculated by subtracting both the explicit and implicit costs from total revenues.
MR Curve
The Marginal Revenue curve represents the change in total revenue that results from selling one additional unit of a good or service.
- Determine the level of output that maximizes profit through the analysis of marginal revenue and marginal cost.
Verified Answer
ML
Miguel LeitaoMay 14, 2024
Final Answer :
C
Explanation :
The profit maximizing output for this firm is where MR=MC, which is Q3. At this output level, the price (which is also equal to MR) is above the average total cost, resulting in positive economic profit. Therefore, the correct answer is option C.
Learning Objectives
- Determine the level of output that maximizes profit through the analysis of marginal revenue and marginal cost.
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