Suppose a perfectly competitive firm is producing a level of output for which price equals average total cost,and average total cost is less than marginal cost.In order to maximize its profits,the firm should
A)reduce its output.
B)expand its output.
C)produce zero output.
D)increase the market price.
E)not change its output.

Question

Quizplus · Accepted Answer

When marginal cost is greater than average total cost, the firm is producing too much and should reduce output to maximize profits.

Suppose a Perfectly Competitive Firm Is Producing a Level of Output