In perfect competition,the profit-maximizing volume is the quantity at which ________.
A)marginal cost equals marginal revenue
B)contribution margin equals fixed cost
C)marginal revenue equals price
D)price exceeds marginal cost

Question

Quizplus · Accepted Answer

In perfect competition, firms are price takers and therefore cannot influence the market price of the good. As a result, marginal revenue is equal to price. The profit-maximizing level of output is reached when marginal cost equals marginal revenue (which is also equal to price in perfect competition). This is because at this level, producing an additional unit of output would cost more than the revenue it would generate, leading to a decrease in profit. Therefore, the optimal quantity for a firm in perfect competition is where MC=MR.

In Perfect Competition,the Profit-Maximizing Volume Is the Quantity at Which