If a purely competitive firm is producing a level of output where the marginal revenue is less than the marginal cost, then its profits must be negative.

Question

Quizplus · Accepted Answer

A purely competitive firm producing at a level where marginal revenue is less than marginal cost may not necessarily have negative profits; it indicates the firm is producing more than the profit-maximizing quantity, but it can still be covering its average total costs and thus earning a profit.

If a Purely Competitive Firm Is Producing a Level of Output