Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $825 per robot. To maximize profits, Robbie's Robots should

A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.

Question

Pushti Sahni · Accepted Answer

Final Answer : C, Explanation :  In a perfectly competitive market, to maximize profits, a firm should produce at the level where price equals marginal cost. Since the marginal cost ($825) is higher than the selling price ($800), Robbie's Robots should decrease their output to reduce costs and increase profits.

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