1. A firm in a competitive market has the following cost structure: Output Total Costs 0 $10 1 $12 2 $15 3 $19 4 $24 5 $30 6 $37 7 $46 8 $55 9 $65 If the market price is $8, how many units should the firm produce to maximize profit? a. 5 units b. 6 units c. 7 units d. 8 units

Question

Business

Kendal Fields

31 May, 05:43

1. A firm in a competitive market has the following cost structure: Output Total Costs 0 $10 1 $12 2 $15 3 $19 4 $24 5 $30 6 $37 7 $46 8 $55 9 $65 If the market price is $8, how many units should the firm produce to maximize profit? a. 5 units b. 6 units c. 7 units d. 8 units

+4

Answers (1)

Know the Answer?

Sloane Schneider · Answer 1

b. 6 units

Explanation:

Output Revenue Costs = Profit (Revenue - Costs)

0 0 10 = - 10

1 8 12 = - 4

2 16 15 = 1

3 24 19 = 5

4 32 24 = 8

5 40 30 = 10

6 48 37 = 11

7 56 46 = 10

8 64 55 = 9

9 72 65 = 7

Note: The revenue is calculated by multiplying output by the market price of $8.

The firm should produce 6 units to maximize their profit which is $11.