Question

"If the market price is​ $20, then to maximize profits this firm should produce" A. two units of output. B. zero units of output. C. an output level of about four. D. one unit of output.

Answer 1

Answer: C. an output level of about four.

Explanation: In order to maximize profit, the firm should produce where its marginal revenue and marginal cost are equal. The firm's marginal cost of production is $20 for each unit. When the firm produces 4 units, its marginal revenue is $20. Thus, the firm should produce 4 units of output.

To find it, divide the total cost (TC) by the quantity the firm is producing (Q). Average cost (AC) or average total cost (ATC): the per-unit cost of output.

Output producer prices are the basic prices received by the producer exclusive of taxes on products, separately invoiced transport charges, and retail and wholesale margins.