Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. To maximize its profit, the firm should
A) increase its output.
B) continue to produce 1,000 units.
C) decrease its output, but continue to produce.
D) shut down.

Question

Quizplus · Accepted Answer

The firm should decrease its output because the marginal cost ($15) is greater than the price ($12), indicating that producing the last unit is not profitable. However, since the price is greater than the average total cost ($11), the firm should continue producing to cover its costs and make a profit.

Assume a Certain Competitive Price-Taker Firm Is Producing Q =