A perfectly competitive firm will maximize profits at that output level where marginal revenue equals
A) marginal cost and price exceeds minimum average variable cost
B) marginal cost and minimum average variable cost exceeds price
C) average total cost and price exceeds minimum average variable cost
D) average variable cost and price exceeds minimum average fixed cost

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm maximizes profit at the output level where marginal revenue (MR) equals marginal cost (MC), provided this output level is above the shutdown point, which is where price exceeds minimum average variable cost (AVC).

A Perfectly Competitive Firm Will Maximize Profits at That Output