A multi- plant firm has three plants and, at its current production levels, the marginal cost of production at each of the three plants is $3. If the firm is perfectly competitive and the market price of its product is $9, which of the following is true?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the profit-maximizing output is reached when marginal cost equals marginal revenue. Since the marginal cost of production at each plant is $3 and the market price is $9, the firm should continue producing at the current levels as long as the revenue covers the variable costs. Thus, the firm is already producing the profit-maximizing total output and there is no need to increase or decrease production at any of the plants. Option C is the correct answer.

A Multi- Plant Firm Has Three Plants And, at Its