A perfectly competitive firm facing a price of $10 decides to produce 100 units. If its marginal cost of producing the last unit is $12 and it is seeking to maximize profit, the firm should:
A) produce more units.
B) produce fewer units.
C) continue producing 100 units.
D) shut down.

Question

Quizplus · Accepted Answer

The firm should produce fewer units because the marginal cost ($12) is greater than the price ($10), indicating that producing the last unit decreases profit.

A Perfectly Competitive Firm Facing a Price of $10 Decides