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Economics please help!!?
A firm operating in circumstances of perfect competition produces and sells 200 units of output daily at a price of $7. Its average total cost is $4.99. If it were to increase output and sales to 201 units daily, average cost would rise to $5.00. To maximize its profit, this firm should:(show your calculation):
a) Increase its output, since marginal cost is approximately $6
b) Reduce its output, since marginal cost is approximately $6.
c) Remain at its present output, since marginal cost is approximately $7.
d) Not reduce its output and increase it since marginal cost is approximately $7.
2 Answers
- Anonymous9 years agoFavorite Answer
$200*$4.99 = $998 cost
$201*$5.00 = $1005 cost
Marginal cost = $1005 - $998 = $7.
c) Remain at its present output, since marginal cost is approximately $7.
