A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production,total revenue ________ and economic profit ________.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, when a firm is producing at the point where marginal cost (MC) equals marginal revenue (MR), it is maximizing its profits. If the firm increases production beyond this point, its marginal cost will be greater than the marginal revenue for the additional units produced, leading to a decrease in economic profit, even though total revenue might increase due to the sale of more units.

A Perfectly Competitive Firm Is Producing at the Point at Which