To maximize profits, a perfectly competitive firm applies the marginal decision rule and thus:

Question

Quizplus · Accepted Answer

The marginal decision rule for profit maximization involves equating the marginal revenue generated by an additional unit of output (or factor of production) to the marginal cost of that unit. Option C accurately describes this principle by stating that a firm hires a factor up to the point where the extra revenue from the additional output equals the extra cost of hiring the additional unit of the factor.

To Maximize Profits, a Perfectly Competitive Firm Applies the Marginal