# Producers, consumers, and competitive markets

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Suppose that a competitive firm's marginal cost of producing output q is given by MC(q)=3+2q. Assume that the market price of the firm's product is $9.

a. What level of output will the firm produce?

b. What is the firm's producer surplus?

c. Suppose that the average variable cost of the firm is given by AVC(q)=3+q. Suppose that the firm's fixed costs are known to be $3. Will the firm be earning a positive, negative, or zero profit in the short run?

https://brainmass.com/economics/output-and-costs/producers-consumers-competitive-markets-29452

#### Solution Preview

a. What level of output will the firm produce?

The first order condition for a competitive firm to maximize its profit is MC = P, i.e.:

3+2q = 9

solve for q =3

so the firm will ...

#### Solution Summary

Producers, consumers, and competitive markets are exemplified.

$2.49