If the market price is $4 and a perfectly competitive firm is producing 500 units and the marginal cost to produce the 500th unit is $4, which of the following is true?

Question

Quizplus · Accepted Answer

At the profit-maximizing level of output, a perfectly competitive firm produces where MC = MR. Since the marginal cost of producing the 500th unit is equal to the market price of $4, the firm is producing at the point where MC = MR, and is therefore maximizing profit. The difference between MR and MC for the 500th unit is zero, not positive or negative. The firm does not need to increase production because it is already at the profit-maximizing level.

If the Market Price Is $4 and a Perfectly Competitive