A perfectly competitive firm sells its good for $20. If marginal cost is four times the quantity produced, how much does the firm produce? Why?Assuming perfect competition, there is not enough information to determine how much the firm is producing.Assuming perfect competition, the firm is producing where MC is twice MR. If the price is $20, then MC is $40. This means that the firm is producing 10 units.Assuming perfect competition, the firm is producing where MR = MC. If the price is $20 and MC is four times the quantity, it is producing 80 units.Assuming perfect competition, the firm is producing where MR = MC = P. Since price is $20, MR is $20. If MC is 4 times the quantity, it is producing 5 units.

Perfectly competitive market refers to the market structure in which there are large number of…

Answered: A perfectly competitive firm sells its…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 16CQ

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A perfectly competitive firm sells its good for $20. If marginal cost is four times the quantity produced, how much does the firm produce? Why?

Assuming perfect competition, there is not enough information to determine how much the firm is producing.
Assuming perfect competition, the firm is producing where MC is twice MR. If the price is $20, then MC is $40. This means that the firm is producing 10 units.
Assuming perfect competition, the firm is producing where MR = MC. If the price is $20 and MC is four times the quantity, it is producing 80 units.
Assuming perfect competition, the firm is producing where MR = MC = P. Since price is $20, MR is $20. If MC is 4 times the quantity, it is producing 5 units.

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