Under what circumstance will a firm in a perfectly competitive industry expand output?

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, a firm will expand output as long as marginal cost is less than marginal revenue. This is because in a perfectly competitive market, where firms are price takers, the marginal revenue curve is identical to the demand curve and is therefore downward sloping. In order to maximize profits, a firm will produce up to the point where marginal cost equals marginal revenue. As long as the marginal cost of producing an additional unit of output is less than the marginal revenue earned from that unit, the firm will continue to expand output.

Under What Circumstance Will a Firm in a Perfectly Competitive