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# Answer to Question #25067 in Microeconomics for Sim

Question #25067
Output (Q) = 5000 pounds
Price (P) = $5.00 per pound Average variable cost (AVC) =$4.00
Marginal cost (MC) = $4.25 Average total cost (ATC) =$4.50
If the firm in a purely competitive market, should the firm increase, decrease or not produce the output? Why?
How should the firm determine the optimal level of output?
1
2013-02-27T04:00:46-0500
To maximize its profits the firm should reach the equality MR = MC = P
Its P &gt; MC, 5 &gt; 4.25, so it should increase its output.
As its P &gt; ATC, it is profitable and should increase its output to maximize profit.

How should the firm determine the optimal level of output?
Output (Q) = 5000 pounds
Price (P) = $5.00 per pound Average variable cost (AVC) =$4.00
Marginal cost (MC) = $4.25 Average total cost (ATC) =$4.50
To maximize its profits the firm should reach the equality MR = MC = P
Its P &gt; MC, 5 &gt; 4.25, so it should increase its output to the point, where P = MR = MC = 5.

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