For the graph shown here, what quantity will this firm produce and what price will it charge?

Choose 1 answer:
(A) $Q_{1} ; P_{1}$
(B) $Q_{1} ; P_{4}$
(C) $Q_{1} ; P_{2}$
(D) $Q_{2} ; P_{3}$
() $Q_{2} ; P_{2}$

Question

For the graph shown here, what quantity will this firm produce and what price will it charge?

Choose 1 answer:
(A) $Q_{1} ; P_{1}$
(B) $Q_{1} ; P_{4}$
(C) $Q_{1} ; P_{2}$
(D) $Q_{2} ; P_{3}$
() $Q_{2} ; P_{2}$

Accepted Answer

∻Solution∻ ‖ a ⋮ Optimal Production Decision: A firm maximizes profit by producing at the quantity where marginal revenue (MR) equals marginal cost (MC), provided MR ≥ MC. ‖ ‖ b ⋮ Price Determination: Under perfect price discrimination, the firm charges the maximum price consumers are willing to pay for each unit, which corresponds to the demand curve. In the absence of perfect price discrimination, the price is determined by the demand at the profit-maximizing quantity. ‖ ‖ c ⋮ Analysis of Graph: Given the horizontal MR curve, the firm is a price taker in a perfectly competitive market. The firm will produce where MR = MC. The price charged will be at the corresponding point on the demand curve, which is also the MR curve in this case. ‖ ‖ d ⋮ Identification of Correct Option: The firm will produce at Q1 where MR intersects MC (point D). The price will be at P1, which is on the ATC curve at quantity Q1, indicating the price at which the firm is covering all its costs, including the average total cost. ‖ ∻Answer∻ ⚹ (A) $Q_{1} ; P_{1}$ ⚹ ∻Key Concept∻ ⚹ Profit Maximization in Perfect Competition ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, a firm maximizes profit by producing at the quantity where MR equals MC, and the price is determined by the market demand curve at that quantity. ⚹◊What is the relationship between marginal cost, average total cost, and quantity produced in the firm's production analysis?⍭ Generate me a similar question◊

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