If a purely competitive firm is producing at some level less than the profit-maximizing output,then:
A) price is necessarily greater than average total cost.
B) fixed costs are large relative to variable costs.
C) price exceeds marginal revenue.
D) marginal revenue exceeds marginal cost.

Question

Quizplus · Accepted Answer

If a purely competitive firm is producing at some level less than the profit-maximizing output, then it means that marginal revenue exceeds marginal cost. This is because the firm will continue to produce as long as the marginal revenue is greater than the marginal cost, until the point where marginal revenue equals marginal cost. Therefore, the correct answer is D.

If a Purely Competitive Firm Is Producing at Some Level