A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will
A)increase and profits will increase.
B)decrease and profits will increase.
C)increase and profits will decrease.
D)decrease and profits will decrease.

Question

Quizplus · Accepted Answer

In a purely competitive market, when a firm is producing at the point where marginal cost equals price, it is maximizing profit. If the firm increases its output beyond this point, its marginal cost will be higher than the price, leading to a decrease in profits, although total revenue might increase due to the higher quantity sold.

A Purely Competitive Firm Is Producing at the Point Where