F Describe approaches to determining the profit-max level of output

Question 1

Perfect of imperfect competitors will max profit by producing Q for which MR=MC

Answer 1

Intuitively, firms should increase Q so long as MR>MC

Question 2

Profit Max Under Perfect Comp

Answer 2

Approaches: Produce Q where MR=MC; firm estimates the change in revenue for each additional unit and the change in cost for each additional unit

Produce Q where TR-TC is at Max; estimates TC for various output quantities (or ranges) and compare it to TR for those quantities Note Maxing profit is sometime equal to minimizing losses. If firm operating MR=MC, but selling at a P below SVC, shutting down is the profit-max decision in SR and LR

Question 3

Profit Max Under Imperfect Comp;Downward sloping demand; P>MR

Answer 3

Max profit;produce Q output MC=MR; same Q for which TR-TC is at max.