Question

The competitive firm maximizes profit when it produces output up to the point where ___________.

• A. price equals average variable cost
• B. marginal revenue equals average revenue
• C. marginal cost equals total revenue
• D. marginal cost equals marginal revenue

Answer 1

Answer: (D)

marginal cost equals marginal revenue

In a competitive market, the firms are only able to maximize it's profit when the marginal cost of the firm is equal to marginal revenue of the firm which means that the firms are earning normal profit in the long run.