Question

The current market price is $30. The marginal cost (MC) is $1 at 1 unit of output and increases by $1 for every extra unit produced, e.g. at 4 units, MC=$4, at 5 units, MC=$5 and so on. Average total cost (ATC) equals $40 and Average variable cost (AVC) equals $32 at the profit-maximizing level of output.

what is the profit maximizing output

Answer 1

The profit is maximized when MR = MC = P, so:

MC = P = $30, then Q = 30 units.