Question

To maximize profit, a perfectly competitive firm should produce where: a. MR = MC. b. P...

To maximize profit, a perfectly competitive firm should produce where:

a. MR = MC.

b. P = MR.
c. P = MC.
d. P = ATC.
e. Answers a and c are correct.

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Homework Answers

Answer #1

e. Answers a and c are correct.

Explanation:

Under perfect competition , the profit maximization condition is where price equals marginal cost ( P = MC).

Under perfect competition , the industry is the price maker whereas the firm is the price taker. It means there is an unique price in the market . Firms are not able to change the market price. They can sell or produce as much as they can at the prevailing market price.


So under perfect competition , Price = Marginal Revenue = Average Revenue ( P = MR = AR)

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