Register
In a perfectly competitive industry the market price is$12. A firm is currently producing 50 units of output; average total cost is $10, marginal cost is $15, and average variable cost is $7. Is the firm
168k views
5 votes
In a perfectly competitive industry the market price is$12. A firm is currently producing 50 units of output; average total cost is $10, marginal cost is $15, and average variable cost is $7. Is the firm making the profit-maximizing decision? Why or why not? If not, what should the firm do?Should the firm shut down? Explain.

User Vishnumanohar
by
5.3k points

1 Answer

1 vote

Answer:

In a perfectly competitive industry the market price is also the marginal revenue of a firm and in order to maximize profit a firm has to produce a output at which marginal revenue is equal to marginal cost. In this case the firm's marginal revenue is fixed at 12 so they need to bring their marginal cost down to 12 in order to maximize profits. What they should do is decrease their output to a quantity so that their marginal cost is also 12, when they do this their marginal cost and marginal revenue will be equal and they will be maximizing profits.

Step-by-step explanation:

User Aleksander Azizi
by
4.9k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

5.7m questions

7.4m answers

Other Questions

_____ reminds customers and clients that they made a good choice in selecting a company with which to do business, or it reminds them of the good qualities of their purchase.​
On august 1 the darius co. purchased a photocopy machine for $8,000. the estimated annual depreciation on the machine is $1,680. if the company prepares annual financial statements on december 31, the
When president obama was elected, the u.s. economy was in trouble, and has slid into a recession. consumer spending was low and getting worse. in an effort to stop the decline, president obama proposed
Ensuring that an individual is who they claim to be is the function of _____. select one: a. confidentiality b. authorization c. availability d. authentication e. nonrepudiation
The current market price for good y is above the equilibrium price, and then the price of a subsitute good, x, increases. the demand curve for good y shifts as a result. what is the likely outcome of the
Link Copied!