The average total cost and marginal cost curves for Blammo Enterprises are shown in this figure:

If the firm's objective is profit maximization, at what price will this firm be willing to sell 6 units?

Choose 1 answer:
(A) $\$ 34$
(B) $\$ 60$
(C) $\$ 4$
(D) $\$ 58$
(E) $\$ 41$

Question

The average total cost and marginal cost curves for Blammo Enterprises are shown in this figure:

If the firm's objective is profit maximization, at what price will this firm be willing to sell 6 units?

Choose 1 answer:
(A) $\$ 34$
(B) $\$ 60$
(C) $\$ 4$
(D) $\$ 58$
(E) $\$ 41$

Accepted Answer

∻Solution∻ ‖ a ⋮ Identify the Marginal Cost (MC) at Quantity 6: The MC at quantity 6 is $4. ‖‖ b ⋮ Determine the Price for Profit Maximization: In a perfectly competitive market, firms maximize profit where $P = MC$. Therefore, the price at which the firm will be willing to sell 6 units is $4. ‖ ∻Answer∻ ⚹ $4 ⚹ ∻Key Concept∻ ⚹ Marginal Cost Pricing ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, firms maximize profit by setting the price equal to the marginal cost (MC). For Blammo Enterprises, the MC at 6 units is $4, so the firm will sell at this price. ⚹◊What is the relationship between marginal cost and average total cost in terms of determining the firm's profit-maximizing level of output?⍭ Generate me a similar question◊

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