In order to maximize profits, a firm in perfect competition will produce a level of output:
A) consistent with the lowest point on the average total cost curve.
B) where the difference between price and average cost is the greatest.
C) where the marginal cost and average total cost curves intersect.
D) where the price equals the extra cost of producing one more unit.

Question

Quizplus · Accepted Answer

In perfect competition, firms maximize profits by producing where price equals marginal cost (MC), which is the extra cost of producing one more unit.

In Order to Maximize Profits, a Firm in Perfect Competition