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optimal level of production

What problems would a firm have in determining its optimal level of production. Give three examples of industries and what factors would influence their ability to estimate the optimal level of production.

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As we know, the optimal level of production is where the marginal cost of the nth unit of a product is equal to the marginal return achieved from that unit. Thus we should have a clear understanding of the demand before determining the production level in a specific industry. For example in the auto industry we may have difficulties in determining the optimum quantity due to the increases and decreases in gas prices. We can forecast ...

Solution Summary

Demonstrate optimal level of production.