Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

11. Perfect Competition

Perfect Competition Profit on the Graph

Microeconomics

11. Perfect Competition

Perfect Competition Profit on the Graph

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Multiple Choice

If the price is P1, the firm maximizes profit by producing

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Verified step by step guidance

Identify the key curves on the graph: the Marginal Cost (MC) curve and the Average Total Cost (ATC) curve.

Understand that a firm maximizes profit where the price (P1) equals the Marginal Cost (MC). This is because the firm will continue to produce additional units as long as the price is greater than the marginal cost.

Locate the point on the graph where the price line (P1) intersects the MC curve. This intersection point indicates the quantity at which the firm maximizes profit.

Observe that the intersection of the price line (P1) and the MC curve occurs at quantity Q2.

Conclude that the firm maximizes profit by producing at quantity Q2, as this is where the price equals the marginal cost, and the firm is covering its costs while maximizing profit.