If a perfectly competitive firm is producing a quantity that generates MC MR, then profit:

Question

If a perfectly competitive firm is producing a quantity that generates MC > MR, then profit:

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and must accept the market price for their goods. If a firm is producing a quantity where MC > MR, this means that the cost of producing an additional unit exceeds the revenue earned from selling it. Therefore, the firm is not maximizing its profit at this level of production. To increase profit, the firm should decrease production until MC = MR, which is where profit is maximized. Therefore, choice C is the best answer. Increasing production would only lead to higher costs and lower profits, and increasing the price would not be possible in a perfectly competitive market.

If a Perfectly Competitive Firm Is Producing a Quantity That