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Author Question: Why does a firm in perfect competition produce the quantity at which marginal cost equals price? ... (Read 88 times)

arivle123

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on: Jun 29, 2018
Why does a firm in perfect competition produce the quantity at which marginal cost equals price?
 
  What will be an ideal response?

Question 2

Refer to Table 4-8. If a minimum wage of 10.50 an hour is mandated, what is the quantity of labor supplied?
 
  A) 400,000 B) 370,000 C) 340,000 D) 60,000


macagn

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Reply #1 on: Jun 29, 2018
Answer to Question 1

A firm's total profit is maximized by producing the level of output at which marginal revenue for the last unit produced equals its marginal cost, or MR = MC. In a perfectly competitive market, MR is equal to the market price P for all levels of output. These points imply that a perfectly competitive firm will maximize profit by producing the quantity at P = MC.

Answer to Question 2

A


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