In: Economics
A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm’s goal is to maximize profit, it should:
• Produce more widgets
• Produce fewer widgets
• Continue producing 500 widgets
• Shut down
Answer
• Continue producing 500 widgets
The perfectly competitive firm maximizes profit at MC=P
and here the price =marginal cost=$50
so the firm should Continue producing 500 widgets