Suppose a competitive firm previously set its price at $20 per unit to maximize

Question

Suppose a competitive firm previously set its price at $20 per unit to maximize its profit, which had been positive. Then the market price rises to $25 and the firm adjusts in order to maximize its profits at the increased price. After these adjustments what can we conclude about the firm’s quantity of output, average total cost, and marginal revenue in terms of being higher, lower, or the same as before?

*****I know that this question has been previously answered, but I'm confused by the wording of the answer (hence my posting it now, looking for a new answer... So please don't just copy and paste the previous response!) Thank you!!

Explanation / Answer

In order to increase the total revenue, firm increases its quantity of output when there is an increase in the price level. Marginal revenue will also increase with increase in price.

Average total cost decreases with the increase in the output.

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