Refer to the figure below. If the market for doughnuts is perfectly competitive, then assuming this firm can earn enough revenue to cover its variable cost, it should produce:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms should produce the quantity at which marginal cost equals the market price in order to maximize profit. At this quantity, the firm will be able to cover both its variable costs and its share of fixed costs, generating positive economic profit in the short run. Therefore, the best choice is option C - the quantity of doughnuts at which marginal cost equals the market price.

Refer to the Figure Below