Assume a certain firm is producing 1000 units of output (so Q = 1000). At Q...
Assume a certain firm is producing 1000 units of output (so Q = 1000). At Q = 1000, the firm’s marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Refer to Scenario 14-1. To maximize its profit, what should the firm do?
Question 17 options:
|
It should shut down. |
|
|
It should decrease its output, but continue to produce. |
|
|
It should continue to produce 1000 units. |
|
|
It should increase its output. |
Homework Answers
Q = 1000
MC=15
ATC = 11
P= 12
Since the firm sets P=MC for profit maximization, the firm should decrease its output but continue to produce as it is able to recover its average variable costs.
option(B)
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