Refer to Figure 23.6 for a perfectly competitive firm.Assuming that points A, B, C and D are all above AVC, this firm will maximize profits by producing the level of output that corresponds to point
A) A.
B) B.
C) C.
D) D

Question

Refer to Figure 23.6 for a perfectly competitive firm.Assuming that points A, B, C and D are all above AVC, this firm will maximize profits by producing the level of output that corresponds to point
A) A. 
B) B. 
C) C. 
D) D

Quizplus · Accepted Answer

The profit-maximizing level of output for a perfectly competitive firm is where marginal revenue (MR) equals marginal cost (MC), which occurs at point C in this graph. At this output level, the firm is producing at the lowest point on its short-run average total cost (ATC) curve, meaning it is minimizing its costs and maximizing its profits.