Question

A firm facing a downward sloping demand curve is producing a level of output at which price is $7, marginal revenue is $5, and average total cost, which is at its minimum value, is $3. In order to maximize profit, the firm should

Answer 1

Answer:

It should keep at the current level of output.

Explanation:

Because at current level the average total cost is at minimun, change the output will move from the optimal point to a sub-optimal output which decreases the profit.

The company will keep producing at this level in the short-run until accumulated capital or innovation moves along the long-run cost to decrease the cost of the industry.