Question

"Ap

Microeconomics
A perfectly competitive firm finds that for the last shirt that it produces and sells, the marginal revenue is \( \$ 20 \) and the marginal cost is \( \$ 22 \). The firm should charge \( \$ 22 \) to m"

Answer 1

To maximize profit, the perfectly competitive firm should produce more shirts, as the marginal revenue of $20 exceeds the marginal cost of $22. Option B: "produce more shirts to increase profit" is answer.

Explanation:

In a perfectly competitive market, profit maximization occurs when marginal revenue (MR) equals marginal cost (MC). In this scenario, the marginal revenue for the last shirt is $20, while the marginal cost is $22. To optimize profit, the firm should continue production as long as MR is greater than MC.

In this case, producing more shirts is justified because the additional revenue generated ($20) exceeds the additional cost incurred ($22).

Options such as charging $22 for the last shirt or producing fewer shirts would not align with profit maximization principles in a perfectly competitive market. Therefore, the optimal strategy is to produce more shirts to increase overall profit.

Therefore Option B is answer.

Complete Question: A perfectly competitive firm finds that for the last shirt that it produces and sells, the marginal revenue is $ 20 and the marginal cost is $ 22. The firm should

charge $ 22 to maximize profit

produce more shirts to increase profit

produce fewer shirts to increase profit

hire more workers to increase production

shut down if the average variable cost is less than $ 20

Answer 2

To maximize profit, the perfectly competitive firm should produce more shirts, as the marginal revenue of $20 exceeds the marginal cost of $22. Option B: "produce more shirts to increase profit" is answer.

Step-by-step explanation:

In a perfectly competitive market, profit maximization occurs when marginal revenue (MR) equals marginal cost (MC). In this scenario, the marginal revenue for the last shirt is $20, while the marginal cost is $22. To optimize profit, the firm should continue production as long as MR is greater than MC. In this case, producing more shirts is justified because the additional revenue generated ($20) exceeds the additional cost incurred ($22).

Options such as charging $22 for the last shirt or producing fewer shirts would not align with profit maximization principles in a perfectly competitive market. Therefore, the optimal strategy is to produce more shirts to increase overall profit.

Option B is answer.

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Complete Question

A perfectly competitive firm finds that for the last shirt that it produces and sells, the marginal revenue is $ 20 and the marginal cost is $ 22. The firm should

charge $ 22 to maximize profit

produce more shirts to increase profit

produce fewer shirts to increase profit

hire more workers to increase production

shut down if the average variable cost is less than $ 20

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