# Question 23 (2 points) The graph below shows the average total cost and marginal cost curves...  Question 23 (2 points) The graph below shows the average total cost and marginal cost curves of a perfectly competitive firm. If the market price is \$7, what is the output level that maximizes the firm's profit? 12 11 10 MC ATC 9 8 Price \$/Q S 4 3 2 0 1 2 3 6 7 8 9 10 11 12 13 14 15 16 Quantity Q23 Q=4
3 N 1 0 0 4 5 6 7 8 9 10 11 12 13 14 Quantity Q=4 Q=8 O Q=10 O Q=12 Question 24 (2 points) Explain why the market demand curve a firm faces in a perfectly competitive mark is horizontal even though the market demand curve is not horizontal.

In a perfectly competitive market to maximize profit, firms set marginal revenue equal to marginal cost (MR=MC). MR is the slope of the revenue curve, which is also equal to the demand curve (D) and price (P).

Here the price is \$7, so when the horizontal line is drawn then this curve is said to be the MR curve and demand curve. Therefore, MR=MC gives the maximum profit output is 10 units. Option C is correct.

##### Add Answer of: Question 23 (2 points) The graph below shows the average total cost and marginal cost curves...
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