Respuesta :
Answer:
In order to maximize profits any company should produce at a quantity when its marginal cost is equal to its marginal revenue.
In this case the market price of the product is 1.25, and because it is perfect competition, a the market price is equal to the marginal revenue of a firm. So we can from this information tell that the marginal revenue of the firm is 1.25 and in order to maximize profits the firm should bring down its marginal cost from 1.5 to 1.25 so that marginal revenue and marginal cost are equal. In order to reduce the marginal cost the firm needs to reduce its output, so that its marginal cost starts falling down to the point where it is 1.25 and equal to the marginal revenue, when both marginal revenue and marginal cost are at 1.25 the firm will maximize its profits.
Explanation:
