Charlie's Chimps is a perfectly competitive firm that produces cuddly chimps for children. The market price of a chimp is $10, and Charlie's produces 100 chimps at a marginal cost of $9 a chimp. Charlie's _ _.

Question

Quizplus · Accepted Answer

DIn a perfectly competitive market, firms maximize profit by producing until marginal cost (MC) equals market price. Since Charlie's MC of $9 is less than the market price of $10, producing more than 100 chimps will increase profit until MC equals the market price. Additionally, Charlie's cannot alter the market price of $10 as it is a price taker in a perfectly competitive market, so it is maximizing profit by selling at the market price as long as MC is less than the price.

Charlie's Chimps Is a Perfectly Competitive Firm That Produces Cuddly