Use the following cost table to answer the next question. The table shows cost d

Question

Use the following cost table to answer the next question.

The table shows cost data for a perfectly competitive firm. If the market price for the firm’s product is $6, what output level will the firm produce to maximize profits?

Multiple Choice

0

12

14

Output Average Variable Cost Average Total Cost Marginal Cost 0 - -   - 2 $2.50 $27.50 $2.5 4   2.00   14.50    1.5 6   2.00   10.33    2.0 8 2.13     8.38    2.5 10   2.30     7.30    3.0 12   2.50     6.67    3.5 14   3.00     6.57    6.0 16   4.00    7.13   11.0

Explanation / Answer

Answer
The perfectly competitive firm maximizes profit at MC=P
at MC=P=$6 where Quantity at the given MC level is Q=14 units
so the firm will maximize profit by producing 14 units

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