A Competitive Firm Currently Produces and Sells 500 Units of Output

question 66

Essay

A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500^th unit of output is $5.75; and the average total cost of producing the 500^th unit of output is $4.00. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

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Definitions:

Behavioral Economists

Experts who investigate the impact of mental, cognitive, emotional, cultural, and social aspects on the financial decision-making of people and institutions.

Marathon Performance

The outcomes or results achieved by individuals or groups in the context of a long-distance running event, typically 26.2 miles.

Precommitments

Binding agreements made in advance to restrict future actions or decisions, often used in behavioral economics to help individuals stick to long-term goals.

Time Inconsistency

The tendency of a person or entity to change their planned course of action over time due to a change in preferences.