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A perfectly competitive firm is producing at the quantity where marginal cost is​ $6 and average total cost is​ $4. The price of the good is​ $5. To maximize its​ profit, this firm should ________.

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sebastiansierraocm

Answer:

The firm should decrease output, because the market price is $5, which is lower than the marginal cost of producing one more unit of output: $6.

However, the average total cost of producing output in this market is $4, so the firm should only produce up to the point where this cost is still $4, so that it can make a profit of $1 in the market.

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