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Principles of Economics8th EditionN. Gregory Mankiw 1,335 solutions Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,009 solutions Principles of Economics7th EditionN. Gregory Mankiw 1,394 solutions 8.b. The Geometry of Profit-Maximization � Perfect competition arises when there are many firms selling a homogeneous good to many buyers with perfect information.� Under perfect competition, a firm is a price taker of its good since none of the firms can individually influence the price of the good to be purchased or sold. As the objective of each perfectly competitive firm, they choose each of their output levels to maximize their profits.� The key goal for a perfectly competitive firm in maximizing its profits is to calculate the optimal level of output at which its Marginal Cost (MC) = Market Price (P). As shown in the graph above, the profit maximization point is where MC intersects with MR or P.� If the above competitive firm produces a quantity exceeding qo, then MR and Po would be less than MC, the firm would incur an economic loss on the marginal unit, so the firm could increase its profits by decreasing its output until it reaches qo.� If the above competitive firm produces a quantity fewer than qo, then MR and Po would be greater than MC, the firm would incur profit, but not to its maximum. Therefore, the firm could increase its profits by increasing its output until it reaches qo.� MICROECONOMICS UNIT 3 MILESTONE 3You passed this Milestone13questions were answeredcorrectly.6questions were answeredincorrectly.2questions wereskipped. These were marked incorrect.1If the goal is to maximize profit, at which point on the graph would afirm’s output be optimized?Point 4Point 3Point 2Point 1CONCEPT Output Optimization: Marginal Revenue / Marginal Cost2Given the information in the graph shown here, at which level ofproduction will profit be maximized? Get answer to your question and much more Output Optimization: Total Revenue / Total Cost3Ben's Bagels charges $10 per dozen bagels and he sells 30 dozen bagelseach day. Ben's costs of production total $150 each day. Ben recently quithis job where he earns $100 per day in order to open his bagel store.Ben's accounting profit per day would be __________.CONCEPT Get answer to your question and much more Accounting Profit4Number ofEmployeesTotal ProductionMarginal Product ofLaborMarginal RevProduct00011919250313752549621511115Based on the data in this table, how many employees should thecompany hire in order to maximize their profit if the price of productis $5 and cost of each worker is $100? Get answer to your question and much more Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document What level of output should the firm produce to maximize its profit?What level of output will the firm produce? To maximize profits, the firm should set marginal revenue equal to marginal cost. Given the fact that this firm is operating in a competitive market, the market price it faces is equal to marginal revenue.
How can a firm maximize profit?A firm maximizes profit by operating where marginal revenue equals marginal cost. This is stipulated under neoclassical theory, in which a firm maximizes profit in order to determine a level of output and inputs, which provides the price equals marginal cost condition.
How many units should the profit maximizing firm produce?In order to maximize profit, the firm should produce where its marginal revenue and marginal cost are equal. The firm's marginal cost of production is $20 for each unit. When the firm produces 4 units, its marginal revenue is $20. Thus, the firm should produce 4 units of output.
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If the goal is to maximize profit, at which point on the graph would a firm’s output be optimized?
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