Which of the following may be consistent with profit-maximizing behavior by a price-taking producer:
A)Output is set where price is equal to marginal cost.
B)Output is set where marginal revenue is equal to marginal cost.
C)No output is produced.
D)(a) and (b)
E)(a) and C
F)(b) and (c)
G)All of the above
H)None of the above

Question

Quizplus · Accepted Answer

In a competitive market, a price-taking producer maximizes profit by producing output where price equals marginal cost (A), which is also where marginal revenue equals marginal cost because price equals marginal revenue for a price-taker (B). Producing no output could also be profit-maximizing if the price is below the minimum of the average variable cost, making all options consistent with profit-maximizing behavior.

Which of the Following May Be Consistent with Profit-Maximizing Behavior