Southern Copper Corporation is a perfectly competitive copper producer with two mines in southern Peru, the...
Southern Copper Corporation is a perfectly competitive copper producer with two mines in southern Peru, the Cuajone and Toquepala Mines. Each mine produces only copper. Although the purity of the ore is the same, say that the managers have noticed that for the last ton of ore mined, the marginal cost at the Cuajone Mine exceeds the marginal cost at the Toquepala Mine. Are Southern Copper’s managers maximizing the firm’s profit? Explain your answer.
Homework Answers
Under the perfectly competitive market firms are only price takers. Each firm seeks to maximize the profit by producing at the level where P =MC.
Here the firm does not observe the law of profit maximization and continues to produce where MC is higher. Thus the firm does not maximize its profit.
The firm must reduce its output level where MC is high.
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Southern Copper Corporation is a perfectly competitive copper
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