If a perfectly competitive firm can sell each unit of output for $9, and the marginal cost of the last unit produced is $8.50, then the:
A)extra benefit of the last unit produced is less than the extra cost.
B)firm should lower its output level in order to increase profits.
C)firm is earning an average profit of $0.50.
D)extra benefit of the last unit produced is greater than the extra cost.

Question

Quizplus · Accepted Answer

For a perfectly competitive firm, the extra benefit of the last unit produced is the revenue the firm generates from selling it. So, here, the added benefit of $9.00 is greater than the added cost of $8.50.

If a Perfectly Competitive Firm Can Sell Each Unit of Output