Question

The Perez Lumber Company sells boards in a perfectly competitive market. The current marginal cost of boards at the current output of 445 board feet per month is $3.57 per board foot. The price of lumber is currently $3.57 per board foot, and the minimum possible average variable cost of producing lumber is $3.88 per board foot. If the firm wants to maximize profit (or minimize losses), it should a. shut down immediately. b. continue producing at its current output level. c. decrease monthly output to 200 board feet. d. increase monthly output above 445 board feet. I believe that the answer is C (and if not that, A), but I do not know how to actually reason/explain my answer (if I am even correct). Help would be great! Thank you.

Answer 1

c. decrease monthly output to 200 board feet.

Step-by-step explanation:

If the firm wants to maximize profit it should decrease monthly output to 200 board feet demand by doing so , vital rate will ultimately increase the cost of the product and shift them to the profit. The correct answer is C.