Use the following figure to answer the question : Figure 9-4 : shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P.
-Refer to Figure 9-4.At a price of $P,the firm will produce the output level _____.
A)OA where marginal cost just covers AVC
B)OB where marginal cost equals the price
C)OC where marginal cost equals ATC
D)OD where the price just covers AVC

Question

Use the following figure to answer the question : Figure 9-4 : shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P. 
-Refer to Figure 9-4.At a price of $P,the firm will produce the output level _____.
A)OA where marginal cost just covers AVC 
B)OB where marginal cost equals the price 
C)OC where marginal cost equals ATC 
D)OD where the price just covers AVC

Quizplus · Accepted Answer

At the price of $P, the firm will produce the output level OB where marginal cost equals the price. This is because firms in competitive markets will produce at the quantity where price equals marginal cost to maximize profit.

Use the Following Figure to Answer the Question : Figure