The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

Question

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In a perfectly competitive market, firms aim to maximize their profits by producing at the quantity where marginal cost equals price. This is because in such a market, a firm is a price taker and can sell any quantity at the going market price. Thus, it is optimal for the firm to produce the quantity where marginal cost equals the marginal revenue (which is equal to price in perfect competition), in order to maximize its profits.

The Short-Run Equilibrium Output of a Competitive Firm Is Found