In perfect competition,additional sales will be profitable if ________.
A) the marginal cost is less than marginal revenue
B) sales price exceeds the variable product cost
C) total variable cost is less than sales price
D) the fixed cost equals the contribution margin

Question

Quizplus · Accepted Answer

In perfect competition, the firm is a price taker, which means it has no control over setting the price. Therefore, the only way for a firm to increase profits is to increase sales by producing more. However, it is only profitable to increase sales if the marginal cost of producing an additional unit is less than the marginal revenue earned from selling that unit. If the marginal cost is equal to or greater than the marginal revenue, the firm would not want to increase sales as it would be losing money on each additional unit produced. Therefore, option A is the correct answer.

In Perfect Competition,additional Sales Will Be Profitable If ________