What does a perfectly competitive firm do to maximize profits?
What will be an ideal response?
The perfect competitor cannot influence market price, so it must find the rate of production that maximizes its profits. The profit-maximizing output is the output at which marginal revenue equals marginal cost. If marginal revenue is greater than marginal cost, an additional unit increases revenues more than costs, so profits increase. If marginal revenue is less than marginal cost, a reduction in output of one unit reduces costs more than revenues, so profits increase. Economic profits are maximized when marginal revenue equals marginal cost.
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State-chartered banks that are members of the _____________ System are examined by the Federal Reserve.
Fill in the blank(s) with the appropriate word(s).
Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12.50 what is the firm's economic profit?
A) zero B) $10 per hour C) -$10 per hour D) $20 per hour