Which of the following is true of a profit-maximizing competitive firm in the short run?
A) The firm produces at the point where price is equal to marginal cost.
B) The firm produces at the point where average cost is at its minimum point.
C) The demand curve faced by each firm in the industry is downward sloping.
D) The firm always makes a zero economic profit.
E) The firm suffers a deadweight loss.

Question

Quizplus · Accepted Answer

In the short run, a competitive firm will produce the quantity of output where marginal cost equals marginal revenue (which is also equal to price in a perfectly competitive market). This is because the firm will continue to produce as long as marginal revenue is greater than or equal to marginal cost, and will stop producing once marginal revenue falls below marginal cost. Producing at any other point would result in a lower profit (or even losses).

Which of the Following Is True of a Profit-Maximizing Competitive