For a perfectly competitive firm, marginal revenue equals marginal cost at 250 units of output. At 250 units, price is greater than average variable cost. It necessarily follows that the

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If the firm is producing at the level where marginal revenue equals marginal cost, it is maximizing its profit in the short run. Since the price is greater than the average variable cost, the firm is covering all of its variable costs and some of its fixed costs. As a result, the firm should continue to produce in the short run.

For a Perfectly Competitive Firm, Marginal Revenue Equals Marginal Cost