Scenario: There are two firms producing ballpoint pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower marginal cost than Firm B. The following graphs illustrate the marginal cost curves of both firms.

-Refer to the scenario above.If the government removes the ban that it had imposed earlier on Firm B and both Firm A and Firm B aim at maximizing profits,the ________.
A) marginal cost of Firm A will eventually be greater than the marginal cost of Firm B
B) marginal cost of Firm B will eventually be greater than the marginal cost of Firm A
C) marginal cost of both firms will eventually be equalized
D) difference in the marginal cost of both firms will eventually increase

Question

Scenario: There are two firms producing ballpoint pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower marginal cost than Firm B. The following graphs illustrate the marginal cost curves of both firms.
 
-Refer to the scenario above.If the government removes the ban that it had imposed earlier on Firm B and both Firm A and Firm B aim at maximizing profits,the ________.
A) marginal cost of Firm A will eventually be greater than the marginal cost of Firm B 
B) marginal cost of Firm B will eventually be greater than the marginal cost of Firm A 
C) marginal cost of both firms will eventually be equalized 
D) difference in the marginal cost of both firms will eventually increase

Quizplus · Accepted Answer

In a competitive market aiming at maximizing profits, firms adjust their output levels such that their marginal costs align. This equilibrium ensures that no firm has a cost advantage in producing an additional unit of output, leading to equal marginal costs among competing firms.

Scenario: There Are Two Firms Producing Ballpoint Pens in a Perfectly