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 both firms operate to maximize profits,the ________.
A) total cost of production is minimized
B) total combined profits are minimized
C) marginal costs of production of both firms are minimized
D) marginal costs of production of both firms are maximized

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 both firms operate to maximize profits,the ________.
A) total cost of production is minimized 
B) total combined profits are minimized 
C) marginal costs of production of both firms are minimized 
D) marginal costs of production of both firms are maximized

Quizplus · Accepted Answer

When firms operate to maximize profits, they adjust their production to the point where marginal cost equals marginal revenue. This behavior tends to minimize the total cost of production across the firms, as each firm is producing at its most efficient point.

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