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Question
A perfectly competitive firm faces a market clearing price of $150 per unit. Average total costs are at the minimum value of $120 per unit at an output rate of 70 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short -run profit-maximizing output rate is
A) 75 units, at which the firm earns zero economic profits per unit sold.
B) 75 units, at which the firm earns negative economic profits per unit sold.
C) 75 units, at which the firm earns positive economic profits per unit sold.
D) 70 units, because price is less than average total costs.
Answer
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