If the market price for multi- plant, perfectly competitive firm is $5, to maximize its profits, the firm should set the overall marginal cost of production to exceed $5.

Question

Quizplus · Accepted Answer

In perfect competition, the firm is a price taker and cannot influence the market price. Therefore, to maximize profits, the firm should set its marginal cost equal to the market price, which in this case is $5. Setting the marginal cost to exceed $5 would mean the firm is producing at a higher cost than necessary, and this would result in lower profits.

If the Market Price for Multi- Plant, Perfectly Competitive Firm