A student guesses the quantity at which a firm maximizes profits looking at the graph below: “I think that the firm maximizes profits by either producing A or C, because the price is equal to the marginal cost.

Output decision under perfect competition (MM: 10)

A student guesses the quantity at which a firm maximizes profits looking at the graph below: “I think that the firm maximizes profits by either producing A or C, because the price is equal to the marginal cost. It would also be profitable to produce B, because the marginal cost at B is equal to the average total cost. It would make zero profit by producing D, because the price is equal to the average total cost.” Is the student right?

Post your initial response early, and check back often to continue the discussion. Be sure to respond to at least two of your classmates.

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