Alex's Furniture Mart produces and sells tables in a perfectly competitive market. When Alex's Furniture Mart produces and sells 250 tables, its marginal cost is equal to $200, and AVC is rising. If the market price of tables is equal to $150, Alex's Furniture Mart should

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm should produce where P=MC. In this case, the market price is $150 and the marginal cost is $200. Since the market price is lower than the marginal cost, the firm is incurring losses. Thus, the best choice is to decrease the level of production to minimize the losses.

Alex's Furniture Mart Produces and Sells Tables in a Perfectly