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

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and face a horizontal demand curve at the market price, which is equal to both average revenue and marginal revenue. Since the firm aims to maximize profits by producing the quantity where marginal revenue equals marginal cost, in a perfectly competitive market where price is constant, this also means that average revenue (which equals price) is equal to marginal cost at the profit-maximizing output. Therefore, the statement is true.

For a Perfectly Competitive Firm, at the Profit-Maximizing Output Average