If a firm in a perfectly competitive market chooses its profit-maximizing quantity, which of the following MUST be true? Choose 1 answer: (A) $P=M C$ (B) $PA T C$ (C) $M RM C$ (E) $M CA T C$

Question

If a firm in a perfectly competitive market chooses its profit-maximizing quantity, which of the following MUST be true?

Choose 1 answer:
(A) $P=M C$
(B) $P>A T C$
(C) $M R<P$
(D) $M R>M C$
(E) $M C>A T C$

Accepted Answer

∻Solution∻ ‖ a ⋮ Profit Maximization Rule: In a perfectly competitive market, a firm maximizes profit by producing the quantity of output at which marginal revenue (MR) equals marginal cost (MC). ‖ ‖ b ⋮ Price Equals Marginal Cost: Since the firm is a price taker in a perfectly competitive market, the price (P) is equal to the marginal revenue (MR). Therefore, for profit maximization, $P = MR = MC$. ‖ ∻Answer∻ ⚹ (A) $P = MC$ ⚹ ∻Key Concept∻ ⚹ Profit Maximization in Perfect Competition ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, a firm's profit-maximizing quantity is where price equals marginal cost, which is also the point where marginal revenue equals marginal cost. ⚹◊What is the relationship between a firm's profit-maximizing quantity and marginal revenue (MR) in a perfectly competitive market?⍭ Generate me a similar question◊

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