Final answer:
The question relates to how firms decide on the quantity of output based on marginal cost and marginal revenue, with a focus on the profitability for cartels and the profit-maximizing output level in perfectly competitive markets.
Step-by-step explanation:
The student's question pertains to the topic of economics, specifically related to market structures and how firms' decisions are influenced by marginal costs (MC) and marginal revenues (MR) in different competitive environments. A cartel essentially behaves as a monopoly, deciding on the quantity of output which equates MR to MC. This intersection also helps determine the monopoly price given the demand curve, leading to potential economic profits. In perfectly competitive markets, firms aim to produce at a quantity where the price equals both MR and MC, achieving allocative efficiency and profit maximization.
When MR intersects MC at multiple points, as noted in the 'Clear It Up' section, the firm should choose the output level which avoids the downward sloping part of the MC curve to maximize profits or minimize losses, thus choosing the higher quantity of output (Q = 65 in the example given).