In a perfectly competitive market, each firm produces its last unit at:
A) the same marginal cost.
B) a unique marginal cost.
C) one of two marginal costs.
D) one of several marginal costs.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, all firms are price-takers and have no market power. They all have access to the same technology and production processes, and the factors of production are perfectly mobile. Therefore, each firm produces its last unit at the same marginal cost as all other firms in the market. This ensures that no firm can increase its profits by charging a higher price, as consumers have perfect information about the market and will switch to a cheaper alternative.

In a Perfectly Competitive Market, Each Firm Produces Its Last