Find the profit maximizing quantity

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Firm i produces its product in a perfectly competitive market. In the figure below, the Average Total Cost and Marginal Cost of producing that product are given by the ATC and MC curves, respectively. The price is determined in the market. Like other firms who compete in this market, firm i is a price-taker. The market price is given by the horizontal line.

1. Find the profit maximizing quantity, and call it X*.

2. Explain how you determined X*.

3. Draw the profit/loss box.

4. Keeping market demand constant, would firm i enjoy greater profit or suffer from greater loss in the long run? Explain why.

Reference no: EM13795883

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