To maximize profits,a competitive firm will seek to expand output until
A)Total revenue equals total cost.
B)The elasticity of demand equals 1.
C)Price equals marginal cost.
D)Price equals $0.

Question

Quizplus · Accepted Answer

The point at which a competitive firm will maximize profits is where price equals marginal cost. At this point, the firm is producing the quantity of output at which the additional revenue generated by producing one more unit (marginal revenue) is equal to the additional cost of producing that one more unit (marginal cost). Any higher quantity would result in a marginal cost higher than marginal revenue, decreasing profits. Therefore, the best choice is C.

To Maximize Profits,a Competitive Firm Will Seek to Expand Output