If the market price of a good is $3, then a profit-maximizing competitive firm will produce
A)after its marginal cost exceeds $3.
B)until its marginal cost reaches $3.
C)after its marginal revenue exceeds $3.
D)until its marginal revenue reaches $3.
E)nothing at all.

Question

Quizplus · Accepted Answer

In a competitive market, a profit-maximizing firm will produce up to the point where its marginal cost (MC) equals the market price. Since the market price is given as $3, the firm will produce until its MC reaches $3, not beyond, because producing more would mean the cost of producing an additional unit would be higher than the revenue it would bring, reducing profit.

If the Market Price of a Good Is $3, Then