Assume for a competitive firm that MC = AVC at $22, MC = ATC at $30, and MC = MR at $35. This firm will
A)realize a profit of $13 per unit of output.
B)minimize its losses by producing in the short run.
C)maximize its profit by producing in the short run.
D)shut down in the short run.

Question

Quizplus · Accepted Answer

The firm will maximize its profit by producing in the short run because the marginal cost (MC) of producing an additional unit is equal to the marginal revenue (MR) from selling that unit at $35. This is the condition for profit maximization for a competitive firm. The information about MC = AVC and MC = ATC at lower prices is not directly relevant to the decision to produce, as long as MC = MR.

Assume for a Competitive Firm That MC = AVC at $22