Competitive firms decide how much output to sell by producing output until the price of the good equals
A)marginal product.
B)the value of marginal product.
C)marginal cost.
D)marginal profit.

Question

Quizplus · Accepted Answer

Competitive firms decide how much output to sell by producing output until the price of the good equals marginal cost. This is because if the price is higher than the marginal cost, the firm can increase profits by producing more; if the price is lower than the marginal cost, the firm should produce less or exit the market to avoid losses. Marginal product and the value of marginal product are important concepts in production theory, but they do not directly determine the optimal level of output for a competitive firm. Marginal profit is simply the difference between marginal revenue and marginal cost, and it can be useful for determining whether a firm should continue producing in the short run, but it does not provide a direct guide for choosing the optimal level of output.

Competitive Firms Decide How Much Output to Sell by Producing