Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. If the marginal cost of producing the 501st unit would be $19, producing and selling the 501st unit would
A)decrease the firm's profit by $19.
B)decrease the firm's profit by $2.
C)increase the firm's profit by $1.
D)increase the firm's profit by $3.

Question

Quizplus · Accepted Answer

The firm sells each unit for $20, and the marginal cost of the 501st unit is $19. Therefore, producing and selling the 501st unit increases profit by $20 - $19 = $1.

Scenario 14-3 Suppose a Certain Competitive Firm Is Producing Q=500 Units of Units