The profit-maximizing level of output for a perfectly competitive firm occurs where:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker, meaning it has no control over the price and must accept the market price as given. Therefore, the firm's marginal revenue (MR) is equal to the market price. The profit-maximizing level of output for a perfectly competitive firm occurs where MR equals marginal cost (MC) because at that level of production, the additional revenue gained from producing an extra unit of output (MR) is equal to the additional cost of producing that unit (MC), resulting in the highest possible profit. Thus, the correct choice is B.

The Profit-Maximizing Level of Output for a Perfectly Competitive Firm