A perfectly competitive firm maximizes its profits by
A) choosing the optimal level of output.
B) maximizing total revenue.
C) choosing the optimal price.
D) pricing slightly under its competitors.
E) maximizing total sales.

Question

Quizplus · Accepted Answer

A perfectly competitive firm will maximize its profits by choosing the level of output where its marginal cost equals its marginal revenue, as this ensures that each additional unit produced adds more to revenue than to cost. Maximizing total revenue or sales may not necessarily result in the highest profits, and pricing below competitors may result in lower profits as well.

A Perfectly Competitive Firm Maximizes Its Profits by