Question

Farmer Brown grows peaches in Georgia. Suppose the market for peaches is perfectly competitive and that the market price for a box of peaches is ​$62 per box. Farmer​ Brown's marginal cost of production is illustrated in the table.
Boxes of Peaches Market Price ​(per box) MarginalCost​ (MC)
0 ​$62
1 62 10.00   

2 62 5.00

3 62 15.00

4 62 30.00

5 62 60.00

6 62 90.00   



What price will farmer Brown charge when maximizing​ profit?
Farmer Brown will charge a price of ​$
?? per box of peaches. ​(Enter your response as an​ integer.)
What is farmer​ Brown's profit-maximizing level of​ output?
Farmer Brown maximizes profit when producing
?? boxes of peaches. ​(Enter your response as an​ integer.)

Answer 1

In case of perfect competition, the producers are price takers. They can sell as much as they can at the existimg price level in the market.

Thus, Farmer Brown charged $62 for his produce. This is because if he charges more than $62, all his customers will go to othe producers who are charging $62 only.

The profit maximising level of output is reached where the marginal cost becomes equal to marginal revenue. The marginal revenue is also equal to price in case of perfect competition.

In this case, marginal cost equals marginal revenue at 0 units of output. Thus, farmer Brown is not able to supply any units of output at the existing price level. Answer is 0.