If production is occurring where marginal cost exceeds price, the purely competitive firm will
A) maximize profit, but resources will be underallocated to the product.
B) maximize profit, but resources will be overallocated to the product.
C) fail to maximize profit and resources will be overallocated to the product.
D) fail to maximize profit and resources will be underallocated to the product.

Question

Quizplus · Accepted Answer

When marginal cost exceeds price, the firm is not maximizing profit because it is producing units that cost more to make than they bring in revenue, leading to an overallocation of resources to the product.

If Production Is Occurring Where Marginal Cost Exceeds Price, the Purely