The table given below shows the total revenue and total cost of a firm at different levels of output.Table 10.2

-To maximize profits in the short run, a perfectly competitive firm will produce the output at which:

Question

The table given below shows the total revenue and total cost of a firm at different levels of output.Table 10.2
 
-To maximize profits in the short run, a perfectly competitive firm will produce the output at which:

Quizplus · Accepted Answer

To maximize profits in the short run, a perfectly competitive firm will produce the output at which price equals marginal cost. This is because at this output level, the firm is able to cover all its costs, including the opportunity cost of using its resources, and is earning the highest possible profit. The options of marginal revenue equaling demand or average total cost are not relevant in this case, and while price equaling marginal revenue is necessary for profit maximization, it alone is not sufficient as the firm also needs to ensure that its costs are being covered. Similarly, total revenue equals total cost is not a relevant criterion for profit maximization as it only indicates the break-even point.

The Table Given Below Shows the Total Revenue and Total