GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Rising marginal cost is less than price
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Rising marginal cost is less than the average cost
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Rising marginal cost is less than the marginal revenue
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None of the above
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Detailed explanation-1: -A perfectly competitive firm will always expand output as long as rising marginal cost is less than the price as the firm will achieve its profit maximization point when MC=AR. Was this answer helpful?
Detailed explanation-2: -In the short run, the perfectly competitive firm will seek the quantity of output where profits are highest or-if profits are not possible-where losses are lowest. In this example, the short run refers to a situation in which firms are producing with one fixed input and incur fixed costs of production.
Detailed explanation-3: -A perfectly competitive firm has only one major decision to make-what quantity to produce? A perfectly competitive firm must accept the price for its output as determined by the product’s market demand and supply.