To maximize profits, a perfectly competitive firm and a monopoly will set ______equal to______ .

Question

Quizplus · Accepted Answer

In both perfectly competitive and monopoly markets, profit maximization occurs at the point where marginal revenue (the additional revenue generated by selling one more unit) is equal to marginal cost (the additional cost of producing one more unit). This is because, at this point, the firm is producing the optimal amount of output where the additional revenue gained from selling one more unit is equal to the additional cost of producing that unit. Therefore, both perfectly competitive and monopoly firms will set marginal revenue equal to marginal cost to maximize profits.

To Maximize Profits, a Perfectly Competitive Firm and a Monopoly