-The profit-maximizing price and quantity established by a perfectly competitive firm in the above figure are
A) Q1 units of output and a price of P5.
B) Q3 units of output and a price of P3.
C) Q1 units of output and a price of P1.
D) Q4 units of output and a price of P4.

Question

-The profit-maximizing price and quantity established by a perfectly competitive firm in the above figure are
A) Q1 units of output and a price of P5. 
B) Q3 units of output and a price of P3. 
C) Q1 units of output and a price of P1. 
D) Q4 units of output and a price of P4.

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers, meaning they accept the market price determined by supply and demand. The profit-maximizing quantity is where marginal cost (MC) equals marginal revenue (MR), which is also the price in perfect competition. In the given options, Q3 and P3 correspond to this condition, as typically, the MC curve intersects the MR curve (or the demand curve in perfect competition) at the profit-maximizing output.

-The Profit-Maximizing Price and Quantity Established by a Perfectly Competitive