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Explanation please :)?
Question 11 Consider the firm whose MC, AC, AVC, AFC functions are shown in the following
graph. If the output price is equal to $16, then the firm maximizes profits by producing? 10 units
100 units 120 units 50 units 75 units
Solution
The Profit is maximised when P=MR=MC
AT P=10, Quantity produced=50 but MC is at its lowest point, nearly zero.
Profit is possible when there is some additional cost for an extra unit produced. so MC has to be
rising and >0
So quantity =50 is not profit maximising.
When Price is =16, quantity produced = 100
This is the point where MC is rising and >0 and P=MR=MC=16
So this quantity is profit maximising at Output price =16