Exhibit 7-12 Marginal revenue and cost per unit curves As shown in Exhibit 7-12, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?

Question

Exhibit 7-12  Marginal revenue and cost per unit curves  As shown in Exhibit 7-12, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?

Quizplus · Accepted Answer

A perfectly competitive firm maximizes profit where marginal revenue equals marginal cost. At point I on the marginal cost curve, the marginal cost is equal to the price of OD and therefore is the profit-maximizing point. Points E and F are not optimal because the marginal cost is higher than the price at point E and lower than the price at point F.

Exhibit 7-12 Marginal Revenue and Cost Per Unit Curves as Shown