Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1
-Refer to Figure 8.1. At 67 units of output, profit is
A) maximized and zero.
B) maximized and negative.
C) maximized and positive.
D) not maximized, and zero.
E) not maximized, and negative.

Question

Consider the following diagram where a perfectly competitive firm faces a price of $40.  Figure 8.1
-Refer to Figure 8.1. At 67 units of output, profit is
A) maximized and zero. 
B) maximized and negative. 
C) maximized and positive. 
D) not maximized, and zero. 
E) not maximized, and negative.

Quizplus · Accepted Answer

At 67 units of output, the marginal revenue (MR) is equal to the marginal cost (MC), which is also equal to the price of $40. This means that the firm is producing at the profit-maximizing level of output. At this level, the total revenue is 67*$40=$2680 and the total cost is $2000, resulting in a profit of $680. Therefore, profit is maximized and positive at 67 units of output.

Consider the Following Diagram Where a Perfectly Competitive Firm Faces