The cost per unit of producing a product is dollars, where x represents the number of units produced per week. If the equilibrium price determined by a competitive market is $120, how many units should the firm produce and sell each week to maximize its profit?
A) 16
B) 8
C) 64
D) none
E) as many as possible

Question

The cost per unit of producing a product is  dollars, where x represents the number of units produced per week. If the equilibrium price determined by a competitive market is $120, how many units should the firm produce and sell each week to maximize its profit? ​
A) 16 
B) 8 
C) 64 
D) none 
E) as many as possible

Quizplus · Accepted Answer

To maximize profit, we need to find the level of production where marginal revenue equals marginal cost. In a competitive market, the equilibrium price is also the marginal revenue, so we need to set the marginal cost equal to $120. 
11x = 120 
x = 10.91 
Since we can't produce a fractional amount of units, we should round down to x = 10. 
Therefore, the firm should produce and sell 10 units each week to maximize its profit.

The Cost Per Unit of Producing a Product Is