At its current level of quantity, a perfectly competitive firm's marginal revenue is $2.50, its short- run marginal cost is $2.50 and its long- run marginal cost is $2.00. Which of the following statements is true?

Question

Quizplus · Accepted Answer

In the short-run, the firm should continue to produce as long as its marginal cost equals or is less than its marginal revenue, which is the case here. However, in the long-run, the firm should adjust its level of output such that its marginal cost equals its marginal revenue, which is $2.00, not $2.50. Therefore, the firm is not maximizing its long-run profit and should adjust its production in the long-run to do so.

At Its Current Level of Quantity, a Perfectly Competitive Firm's