Table 4-3

-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of cowboy hats is $35, The Waco Kid will produce
A)1 hat.
B)2 hats.
C)3 hats.
D)4 hats.

Question

Table 4-3
 
-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of cowboy hats is $35, The Waco Kid will produce
A)1 hat. 
B)2 hats. 
C)3 hats. 
D)4 hats.

Quizplus · Accepted Answer

To determine the optimal level of production, the firm will produce at the point where marginal cost equals market price, which in this case is $35. From the table, we can see that at a production level of 2 hats, the marginal cost is $35, so the firm will produce 2 hats. At any level above 2, the marginal cost is higher than the market price and the firm would incur losses. Therefore, the best choice is to produce 2 hats.

Table 4-3 -Refer to Table 4-3.The Table Above Lists the Marginal Cost