In the short run, under imperfect competition, a firm that wishes to maximize profits or minimize losses should produce that output which:
A)equates marginal cost with marginal revenue.
B)equates marginal cost with price.
C)corresponds to the lowest point on the average variable cost curve.
D)corresponds to the lowest point on the average total cost curve.
E)equates average cost with price.

Question

Quizplus · Accepted Answer

Equating marginal cost with marginal revenue is the profit-maximizing condition for firms under imperfect competition in the short run. This is because the additional revenue from selling one more unit (marginal revenue) should be equal to the additional cost of producing that unit (marginal cost).

In the Short Run, Under Imperfect Competition, a Firm That