If the market price is $3 and a perfectly competitive firm is producing 1,200 units and the marginal cost to produce the 1,200th unit is $4.53, which of the following is true?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm will maximize profit where marginal revenue (MR) equals marginal cost (MC). Since the marginal cost of producing the 1,200th unit is $4.53, which is greater than the market price of $3, producing this unit would result in a loss. Therefore, the difference between marginal revenue and marginal cost (MR- MC) for the 1,200th unit is negative, which means the firm is not maximizing profit at this level of production. The firm should reduce production to increase profit.

If the Market Price Is $3 and a Perfectly Competitive