Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $625 per robot. To maximize profits, Robbie's Robots should
A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm maximizes profit by producing until marginal cost equals marginal revenue (price). Since the marginal cost ($625) is less than the price ($800), Robbie's Robots can increase profits by increasing output.

Assume Robbie's Robots Operates in a Perfectly Competitive Market Producing