Question

The perfectly competitive firm produces that quantity at which a.marginal revenue is greater than marginal cost. b.the largest gap exists between price and marginal cost. c.marginal cost equals marginal revenue. d.marginal cost is falling. e.b and d

Answer 1

Answer:

Option (c) is correct.

Explanation:

The perfectly competitive firm produces at a point where the marginal revenue is equal to the marginal cost because it the profit maximizing point for the competitive firms. Under the perfectly competitive market conditions, the price is determined by the two forces: demand and supply of the goods.

The firms under this market condition, faces a perfectly elastic demand curve which implies that the buyers are free to buy any quantity of goods.