firm faces market price $12 unit and at this price the upward-sloping portion of the marginal cost curve crosses its marginal revenue curve at an output level of 1800 units. at 1800 its adverage variable costs $7 whats the max output level
The profit maximizing level of output that the firm must produce is 1800 units as at this output, MR=MC and MC is rising. The total revenue is 1800 *12= $21600. The total variable costs are 1800*7= $12600. As the total revenue exceeds the total variable cost, the firm will undertake the production of 1800 units.
Dec 8th, 2014
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