A perfectly competitive firm finds itself in the following situation: TR = $10 000; TC = $8000; TFC = $2000; P = $7; and MC = $8. The firm should:
A) increase production.
B) do nothing, as it is already maximizing profits.
C) decrease production
D) shut down.

Question

Quizplus · Accepted Answer

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

A Perfectly Competitive Firm Finds Itself in the Following Situation