This graph represents the cost and revenue curves of a firm in a perfectly competitive market.
According to the graph shown,the long-run output decision for this firm is:

Question

This graph represents the cost and revenue curves of a firm in a perfectly competitive market. 
According to the graph shown,the long-run output decision for this firm is:

Quizplus · Accepted Answer

In a perfectly competitive market, firms operate where marginal cost equals marginal revenue, which happens at point Q2 where MC and MR intersect. This also corresponds to the price of P1. At this output level, the firm is able to maximize profits as it is producing at the minimum point on its long-run average cost curve (LRAC). Producing at Q1 would result in economic losses, while producing at Q3 would be inefficient as the firm would be producing beyond the minimum point on its LRAC curve. Producing at P2 would also be inefficient as the firm would be charging a higher price than the perfectly competitive market price, resulting in reduced demand and lower profits.

This Graph Represents the Cost and Revenue Curves of a Firm