Question

Use the following graph to answer the next question. Given the graph above, which level of output should the perfectly competitive firm choose? Multiple Choice 0 either X, or X3 since profits will be the same 0 X3, since any increase in output beyond that point will reduce profits 0 X1, since a lower level of output will reduce profits 0 X2, since at this level of output the difference between MR and MC is maximized

Answer 1

Answer
option 2
the firm will choose at MR=MC which is at X3
as
profit =sum of marginal profits
marginal profit =MR-MC
if MR>MC then profit increases but MC>MR then profit decreases.