If a perfectly competitive firm in equilibrium increases output by 25 per cent marginal revenue will fall and marginal costs will rise.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, marginal revenue remains constant and equal to the price. Therefore, if a firm increases output, marginal revenue does not fall. However, marginal costs may rise due to the law of diminishing returns.

If a Perfectly Competitive Firm in Equilibrium Increases Output by 25