At a perfectly competitive firm's short-run equilibrium level of output,

Question

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At a perfectly competitive firm's short-run equilibrium level of output, price (P) is equal to both marginal revenue (MR) and marginal cost (MC). This is because in perfect competition, the firm is a price taker and can sell all of its output at the market price. Therefore, each additional unit sold (marginal revenue) brings in the same amount of revenue as the previous unit, which is equal to the market price. In order to maximize profits, the firm will produce at the level of output where marginal cost equals marginal revenue. At this point, the price will also equal both marginal revenue and marginal cost.

At a Perfectly Competitive Firm's Short-Run Equilibrium Level of Output