Narrbegin Exhibit 7.6
-According to Exhibit 7.6, if MR = $20, the result for a perfectly competitive firm will be:

Question

Narrbegin Exhibit 7.6  
-According to Exhibit 7.6, if MR = $20, the result for a perfectly competitive firm will be:

Quizplus · Accepted Answer

In perfectly competitive markets, a firm will produce where marginal revenue (MR) equals marginal cost (MC). If MR is $20, the firm's profit-maximizing output level will be where MC also equals $20. However, in the short run, a firm may operate at a loss if the price they receive (which is equal to the market price in perfect competition) is less than their average variable cost (AVC). In this case, the firm's AVC is $25, which is higher than their MR of $20, so they will be making a short-run loss. Choice C is the only option that reflects this outcome.