If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

A) price is necessarily greater than average total cost.
B) fixed costs are large relative to variable costs.
C) price exceeds marginal revenue.
D) marginal revenue exceeds marginal cost.

Question

kennedy eckert · Accepted Answer

Final Answer : D, Explanation :  In a purely competitive market, price equals marginal revenue (P=MR), and profit maximization occurs where marginal revenue equals marginal cost (MR=MC). If a firm is producing less than the profit-maximizing output, it means marginal revenue (or price in this context) exceeds marginal cost, indicating that increasing production would increase profit until MR=MC.

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

A) price is necessarily greater than average total cost.
B) fixed costs are large relative to variable costs.
C) price exceeds marginal revenue.
D) marginal revenue exceeds marginal cost.

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Learning Objectives

Related questions

If a purely competitive firm is producing at some output level less than the profit-maximizing output, thenA) price is necessarily greater than average total cost.B) fixed costs are large relative to variable costs.C) price exceeds marginal revenue.D) marginal revenue exceeds marginal cost.

Definitions

Learning Objectives

Learning Objectives

Related questions

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

A) price is necessarily greater than average total cost.
B) fixed costs are large relative to variable costs.
C) price exceeds marginal revenue.
D) marginal revenue exceeds marginal cost.