Atmos enterprises produces watches in a perfectly competitive market. Its cost and revenue curves are shown in this graph.

What quantity will this firm produce, and what price will it charge, in the short run?

Choose 1 answer:
(A) $Q=8000 ; P=\$ 75$
(B) $Q=6000 ; P=\$ 80$
(C) $\mathrm{Q}=8000 ; \mathrm{P}=\$ 48$
(D) $Q=6000 ; P=\$ 48$
(E) This firm will shut down
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Question

Atmos enterprises produces watches in a perfectly competitive market. Its cost and revenue curves are shown in this graph.

What quantity will this firm produce, and what price will it charge, in the short run?

Choose 1 answer:
(A) $Q=8000 ; P=\$ 75$
(B) $Q=6000 ; P=\$ 80$
(C) $\mathrm{Q}=8000 ; \mathrm{P}=\$ 48$
(D) $Q=6000 ; P=\$ 48$
(E) This firm will shut down
Report a problem

Accepted Answer

∻Solution∻ ‖ a ⋮ Profit Maximization: In a perfectly competitive market, a firm maximizes profit where Marginal Cost (MC) equals Marginal Revenue (MR). ‖ ‖ b ⋮ Identifying Quantity: From the graph, the MC curve intersects the D=MR curve at a quantity of 8,000 units. ‖ ‖ c ⋮ Identifying Price: In a perfectly competitive market, the price is determined by the market and is equal to the MR. From the graph, the price is $75. ‖ ∻Answer∻ ⚹ $Q=8000 ; P=\$ 75$ ⚹ ∻Key Concept∻ ⚹ Profit Maximization in Perfect Competition ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, firms maximize profit by producing the quantity where Marginal Cost (MC) equals Marginal Revenue (MR). The price is determined by the market and is equal to the MR. ⚹◊What is the relationship between marginal cost (MC) and average total cost (ATC) in the short run for a perfectly competitive firm?⍭ Generate me a similar question◊

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