Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds this firm's marginal cost. It follows that producing one more computer will cause this firm's
A) total cost to decrease.
B) profits to increase.
C) profits to decrease.
D) profits to remain unchanged.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if the price exceeds the marginal cost, producing additional units will increase profits because the additional revenue from selling one more unit (price) is greater than the additional cost of producing that unit (marginal cost).

Assume Dell Computer Company Operates in a Perfectly Competitive Market