Answer to Question #95357 in Economics for Wilson Pilane

Question

In a perfectly competitive industry, the market price is 20. An individual firm produces output at which MC=25. What should the firm do to maximise profits or to minimise losses in the short run

Answer 1

The firm should produce such level of output, for which MR = MC = P to maximise profits or to minimise losses in the short run. As P < MC, then the firm should decrease the output produced to the level at which P = MC = 20.