For a perfectly competitive firm, average revenue equals marginal cost at the profit-maximizing output.

Question

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In a perfectly competitive market, a firm is a price taker and thus the average revenue (AR) equals the price of the product. In order to maximize profits, the firm produces at the point where marginal cost (MC) equals price (and thus AR). Therefore, in this case, AR (price) equals MC at the profit-maximizing output.

For a Perfectly Competitive Firm, Average Revenue Equals Marginal Cost