If a perfectly competitive firm finds that it is producing an amount of output such that MR MC and P AVC, it will

Question

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

Quizplus · Accepted Answer

If MR is greater than MC, it means that the firm can still increase profit by producing more. If P is greater than AVC, it means that the firm is covering its variable costs and some of its fixed costs. Therefore, it is profitable for the firm to increase its output in order to maximize its profit.

If a Perfectly Competitive Firm Finds That It Is Producing