To increase its profit,a perfectly competitive firm will produce more output when
A) price is greater than average fixed cost.
B) price is greater than marginal cost.
C) marginal cost is less than average total cost.
D) average variable cost is greater than average fixed cost.
E) price is greater than average variable cost.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will increase its output as long as the price of the product is greater than the marginal cost of producing an additional unit. This is because the firm can increase its profit by producing and selling additional units at a price higher than their cost.

To Increase Its Profit,a Perfectly Competitive Firm Will Produce More