A profit maximizing firm is perfect competition produces where ?
Correct answer: C. Marginal revenue equals marginal cost
- A. Total revenue is maximized
- B. Marginal revenue equals zero
- C. Marginal revenue equals marginal cost
- D. Marginal revenue equals average cost
Explanation
Profit rises when the revenue from an additional unit exceeds its additional cost and falls when the reverse is true. The maximizing output is therefore where marginal revenue equals marginal cost, provided the firm operates.
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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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