If a perfectly competitive firm produces at an output level where marginal cost equals marginal revenue, then
A) the difference between TR and TC is zero.
B) the firm should shut down.
C) the firm is maximizing its revenue.
D) there is no reason to reduce or expand output, as long as AVC is greater than or equal to price.
E) the last unit produced adds the same amount to costs as it does to revenue.

Question

Quizplus · Accepted Answer

When a perfectly competitive firm produces where marginal cost equals marginal revenue, the last unit produced adds the same amount to costs as it does to revenue, which is the condition for profit maximization.

If a Perfectly Competitive Firm Produces at an Output Level