Competitive firms decide how much output to sell by producing output until the price of the good equals which of the following

Question

Quizplus · Accepted Answer

Competitive firms decide how much output to sell by producing output until the price of the good equals marginal cost. This is because if the price is higher than their marginal cost, they can increase profits by producing and selling more units of output. On the other hand, if the price is lower than marginal cost, they would be making losses and it would not be profitable to produce more units. Therefore, they adjust their production to maximize profits, which occurs at the point where price equals marginal cost.

Competitive Firms Decide How Much Output to Sell by Producing