|
20. Perfectly competitive firms produce where MC = P, if possible. If this can't be exactly achieved, they will produce an output as close
as possible as long as MC < P.
Since we know that P = $32 we have to find where MC is less than or equal to $32. The table doesn't give MC but Marginal Cost is just
the change in cost due to an increase in output of one unit, so we've computed MC for
each unit and added it as a column to the table. As we can see, the firm will maximize profits by producing 5 units since the MC of the 5th unit is just below the price of $32, but the MC of the 6th unit is higher than the price.
|
| Gross Generalizations |
| Output |
Total Cost |
MC |
| 0 |
25.00 |
-- |
| 1 |
35.00 |
35.00 |
| 2 |
50.00 |
15.00 |
| 3 |
70.00 |
20.00 |
| 4 |
95.00 |
25.00 |
| 5 |
125.00 |
30.00 |
| 6 |
160.00 |
35.00 |
| 7 |
200.00 |
40.00 |
|
