If the market price is $2 and a perfectly competitive firm is producing 1,000 units and the marginal cost to produce the 1,000th unit is $2, which of the following is true?

Question

Quizplus · Accepted Answer

A perfectly competitive firm maximizes profits where marginal revenue (MR) equals marginal cost (MC). In this scenario, the marginal cost of producing the 1,000th unit is $2, which is equal to the market price. Therefore, the profit-maximizing level of output for this firm is 1,000 units. At this level of output, the difference between marginal revenue and marginal cost (MR - MC) is zero, indicating that the firm is earning maximum profit. Therefore, option C is the correct answer. Option A is incorrect because there is no information given about the marginal revenue or marginal cost for the 500th unit. Option B is incorrect because the firm is producing the profit-maximizing level of output. Option D is incorrect because the question only provides information about the marginal cost of the 1,000th unit, not the 500th unit.

If the Market Price Is $2 and a Perfectly Competitive