If a perfectly competitive firm finds that it is producing an amount of output such that MR MC
And P AVC, it will

Question

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC
And P > AVC, it will

Quizplus · Accepted Answer

In a perfectly competitive market, if a firm finds that its marginal revenue (MR) is greater than its marginal cost (MC), it means that producing additional units of output will increase its profit. Therefore, the firm will increase its output. The condition P > AVC (price is greater than average variable cost) indicates that the firm is covering its variable costs and contributing to its fixed costs, so there's no immediate incentive to leave the industry or decrease production.

If a Perfectly Competitive Firm Finds That It Is Producing