By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that:

Question

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A firm in a competitive market aims to maximise profit, which is achieved when marginal revenue equals marginal cost. If marginal revenue is greater than marginal cost, the firm can increase profit by producing more. If marginal cost is greater than marginal revenue, the firm can increase profit by producing less. Therefore, the optimal production level is where marginal revenue equals marginal cost, maximising profit.

By Comparing Marginal Revenue and Marginal Cost, a Firm in a Competitive