For the bottle maker whose cost curves are shown in Figure 6.6, find the profit-maximizing output level if bottles sell for $0.20 each. How much profit will this firm earn? What is the lowest price at which this firm would continue to operate in the short run?

Data from Figure 6.6

Transcribed Image Text:

Cost ($/bottle) 0.35 MC ATC 0.30 AVC 0.25 0.20 0.15 0.12 0.10 0.07 0 160 200 260 300 Output (bottles/day) Price FIGURE 6.6 Price Marginal Cost: The Perfectly Competitive Firm's Profit-Maximizing Supply Rule. If price is greater than marginal cost, the firm can increase its profit by expanding production and sales. If price is less than marginal cost, the firm can increase its profit by producing and selling less output.