CFA Practice Question

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CFA Practice Question

Suppose there are 50 firms in a perfectly competitive market and each maximizes profit at 50 units of output when market price is $15.00 per unit. One of the points on the market supply curve must be at ______.

A. price = $15 and quantity supplied = 2,500
B. price = $15 and quantity supplied = 25,000
C. price = $3.33 and quantity supplied = 2,500
Correct Answer: A

To find quantity supplied for the market, multiply the output of each firm by the number of firms in the market, since each firm produces the same amount.

User Contributed Comments 3

User Comment
vatsal92 Also, the price would remain constant. Hence, you can eliminate your choice to A or B and then go for the multiplication of firms' output.
fzhou According to the question, each firm maximizes its profit by producing 50 units, and there're 50 firms in the market, so total output = 50 X 50 =2,500 units. Given that the price of each firm is $15, so the point that MUST be on the curve is $15, 2,500 units.
khalifa92 such profoundness and mysteriousness.
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