Consider a perfectly competitive industry in the short-run.When a firm in this industry is at its profit-maximizing level of output,it
A)is doing as well as it can and is making a profit.
B)may be making a profit or incurring a loss.
C)is producing where P = AVC.
D)is producing where MC = AC.
E)is producing where price exceeds marginal cost.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm maximizes profit by producing where marginal cost (MC) equals marginal revenue (MR), which is also the price (P). At this point, the firm may be making a profit if P > average total cost (ATC), or incurring a loss if P < ATC.

Consider a Perfectly Competitive Industry in the Short-Run