A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should
A) raise its price.
B) lower its price.
C) increase its output.
D) decrease its output.
E) increase the price it charges for its product.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot change the price. Since the marginal cost ($6) is greater than the price ($5), the firm is producing at a loss for each additional unit. To maximize profit, the firm should decrease its output until marginal cost equals the price.

A Perfectly Competitive Firm Is Producing at the Quantity Where