In perfect competition,the profit-maximizing level of output occurs where the:

Question

Quizplus · Accepted Answer

In perfect competition, firms are price takers, meaning they have no control over the price and must sell their output at the prevailing market price. Therefore, the profit-maximizing level of output occurs where marginal revenue (MR) equals marginal cost (MC). If MR is greater than MC, the firm can increase profit by producing more, and if MR is less than MC, the firm can increase profit by producing less. Choice B is incorrect because producing below minimum AVC would lead to shutdown. Choice C is incorrect because producing where MR is less than MC would lead to lower profit or even losses. Choice D is incorrect because producing below MC would also lead to lower profit or even losses.

In Perfect Competition,the Profit-Maximizing Level of Output Occurs Where The