Calini's sells empanadas in a perfectly competitive market. Calini's is currently producing 500 empanadas, and the marginal cost of the 500th empanada produced is $2.95. If the market price of an empanadas is $4, which of the following statements is true?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms should produce where price equals marginal cost. Since the price of an empanada ($4) is higher than the marginal cost of producing the 500th empanada ($2.95), Calini's can increase profit by producing more empanadas.

Calini's Sells Empanadas in a Perfectly Competitive Market