Why does a firm in perfect competition produce the quantity at which marginal cost equals price? In a perfectly competitive market, the price of a handsaw is $25. When a firm maximizes its profit, it produces 6 handsaws a day. Draw the marginal revenue curve. Label it. Draw the marginal cost curve that illustrates the profit-maximizing output. Label it. Draw a point at the profit-maximizing output and price. A firm produces the quantity at which marginal cost equals price because when marginal cost is greater than price, the firm O A. can increase economic profit by producing 1 less handsaw O B. is maximizing economic profit O C. is at its shutdown point O D. can increase economic profit by producing 1 more handsaw 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- 0- Price (dollars per handsaw) 0 8 Quantity (handsaws per day) >>> Draw only the objects specified in the question. 10

The graph shows a firm in a perfectly competitive market making a profit. The graph includes the firm's marginal cost curve, average total cost curve, and average variable cost curve. Assume the market price is $28. 1.) Use the line drawing tool to graph the firm's demand curve. Label this line 'Demand'. 2.) Use the point drawing tool to plot the firm's profit-maximizing price and quantity. Label this point 'Point A'. 3.) Use the rectangle drawing tool to shade in the firm's profit (Profit/Loss). Properly label this shaded area. Carefully follow the instructions above, and only draw the required objects. Price and cost 48- MC 44- 40- 36- 32- ATC 28- AVC 24- 20- 16- 12- 8- 4- Quantity

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output. If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should A) decrease its production. B) shut down. C) increase its production. D) increase the price it charges for its product. E) do nothing because it is already maximizing its profit.

M10