A perfectly competitive firm finds itself in the following situation: TR = $10 000; TC = $8000; TFC = $2000; P = $8; and MC = $7. The firm should:
A) do nothing, as it is already maximizing profits.
B) increase production.
C) shut down.
D) decrease production, but not shut down.

Question

Quizplus · Accepted Answer

The firm should increase production because the marginal cost (MC) of $7 is less than the price (P) of $8, indicating that producing additional units will increase profit.

A Perfectly Competitive Firm Finds Itself in the Following Situation