By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be
A)maximizing total revenue.
B)maximizing profit.
C)minimizing variable cost.
D)minimizing average total cost.

Question

Quizplus · Accepted Answer

In a competitive market, firms aim to maximize profit, which can be achieved by producing at the level where marginal revenue equals marginal cost. If marginal revenue is greater than marginal cost, the firm can increase profit by producing more. If marginal cost is greater than marginal revenue, the firm can increase profit by producing less. Therefore, choice B, maximizing profit, is the correct objective of the firm in a competitive market.

By Comparing Marginal Revenue and Marginal Cost, a Firm in a Competitive