A competitive firm produces a level of output at which ?
Correct answer: B. price equals marginal cost
- A. Price is greater than marginal cost
- B. price equals marginal cost
- C. price is less than marginal cost
- D. None of the above
Explanation
A competitive firm maximizes profit at the output where price, which equals marginal revenue, equals marginal cost. Producing beyond this point would make the extra unit cost more than it earns.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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