To maximize expected profit, a perfectly competitive firm with a random marginal cost and random demand should produce at the level that sets ________ equal to ________.

Question

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A perfectly competitive firm should produce at the output level where marginal revenue equals marginal cost. However, in the case of random marginal cost and demand, the firm should take into account the expected values of both. Thus, the firm should produce at the level that sets expected marginal revenue equal to expected marginal cost, which is the choice A.

To Maximize Expected Profit, a Perfectly Competitive Firm with a Random