Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $7.00. The firm should

Question

Quizplus · Accepted Answer

Since MR < MC, the firm is currently producing more than the profit-maximizing level of output. To maximize profit, the firm should decrease output until MR = MC. Therefore, the firm should choose to decrease its output, which would allow it to reduce its costs and increase its profit.

Suppose a Perfectly Competitive Firm Faces the Following Short-Run Cost