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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

How does a competitive firm determine its profit-maximizing level of output? Explain. • When does a profit-maximizing competitive firm decide to shut down? When does it decide to exit a market?

To determine
The competitive firm determination of profit-maximizing level of output and shutdown and exit of the firm.

Explanation

A profit-maximizing firm would produce output at the point where the marginal cost is equal to marginal revenue and sets price at the corresponding level. If the price of the firm is greater than the marginal cost, then the firm can increase its profit by increasing the level of output and vice versa...

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