The following graph shows the marginal cost curves of two profit-maximizing firms in a perfectly competitive market.

-Refer to the graph above.At the competitive equilibrium price in this market,Firm 1 produces ________ compared to Firm 2,and will get ________ in producer surplus.
A) more; more
B) more; less
C) less; more
D) less; less

Question

The following graph shows the marginal cost curves of two profit-maximizing firms in a perfectly competitive market.
 
-Refer to the graph above.At the competitive equilibrium price in this market,Firm 1 produces ________ compared to Firm 2,and will get ________ in producer surplus.
A) more; more 
B) more; less 
C) less; more 
D) less; less

Quizplus · Accepted Answer

At the competitive equilibrium price, Firm 1, which is presumably more efficient or has a lower cost structure, would produce more than Firm 2 due to its ability to offer goods at a lower price while still making a profit. Consequently, Firm 1 would also earn more in producer surplus because it can sell more units at a price above its marginal cost compared to Firm 2.

The Following Graph Shows the Marginal Cost Curves of Two