Answer to Question #18886 in Microeconomics for arianna

Question

Tomato farms is selling tomatoes in a purely competitive market. It's output is 5000 bushels, which sell for $15 a bushel. At this level of output, the marginal cost is $15 a bushel and average total cost is $14.50 a bushel. Should the firm increase output, decrease output, or not produce? Why?

Answer 1

The firm is maximizing its profit at P=MC=MR=$15. The unit profit is 15-14.50=$.50.Other firms will enter the market.