Firms in perfectly competitive markets who wish to maximize profits should produce where:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm is a price taker and thus, the market price is given. The firm can sell any amount of output at this price. Therefore, to maximize profits, the firm should produce at the level of output where marginal revenue (MR) equals marginal cost (MC). At any other output level, either MR>MC or MR<MC, and in both cases, the firm can increase profits by adjusting output. Therefore, choice A is the correct answer.

Firms in Perfectly Competitive Markets Who Wish to Maximize Profits