If a perfect competitor is currently charging $9 for its product and the marginal cost of the last unit produced is $6, the firm should
A) cut back production and increase price
B) stay at its current price and output level
C) increase price and output
D) increase price and hold output constant
E) increase output

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms maximize profit by producing until marginal cost equals marginal revenue (price). Since the price ($9) is higher than the marginal cost ($6), the firm should increase output to maximize profits.

If a Perfect Competitor Is Currently Charging $9 for Its