Question

Suppose that a perfectly competitive firm faces a market price of ​$5 per​ unit, and at this price, the​ upward-sloping portion of the​ firm's marginal cost curve crosses its marginal revenue curve at an output level of 1,500 units. If the firm produces 1,500 ​units, its average variable costs equal ​$5.50 per​ unit, and its average fixed costs equal ​$0.50 per unit.  What is the​ firm's profit-maximizing​ (or loss-minimizing) output​ level? nothing. ​(Enter your response as a whole number long dash— include the minus sign if necessary.​) What is the amount of its economic profits​ (or losses) at this output​ level? ​$ nothing. ​(Enter your response as a whole number long dash— include the minus sign if necessary.​)

Answer 1

Profit is maximised when marginal revenue=marginal cost

Since price=5, P=AR=MR=5 in perfect competitiin

Also firms produces Q=1500 when MR=MC

Thus Firm is not Able to recover it’s variable cost when Firm produces at profit maximising situation

Thus Firm should produce nothing and firm will incur a loss=750

Economic profit=-750