You Are Running a Business in a Perfectly Competitive Market

question 20

Essay

You are running a business in a perfectly competitive market. Your product sells for $5 and your marginal costs rise as output rises. What should you do in the two situations described below? What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?
(a) The additional cost of producing another unit of output is $4. What should you do? What will this do to your total profit?
(b) The additional cost incurred from your last unit of output produced is $6. What should you do? What will this do to your total profit?
(c) What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?

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Definitions:

Bicarbonate

A salt-containing the anion HCO3, involved in the buffering of pH levels in the blood and other fluids of the body.

Cation

A positively charged ion that moves towards the cathode (negative electrode) in an electrical field.

Sodium

A chemical element with symbol Na and atomic number 11, essential for human health but harmful in excess.

Potassium

A mineral and electrolyte that is crucial for the proper functioning of the body's cells, nerves, and muscles, particularly the heart.