McqMate
| Q. |
In equilibrium, a perfectly competitive firm will equate - |
| A. | marginal social cost with marginal social benefit |
| B. | market supply with market demand |
| C. | marginal profit with marginal cost |
| D. | marginal revenue with marginal cost |
| Answer» D. marginal revenue with marginal cost | |
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Explanation: A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. In that price equals marginal revenue for a perfectly competitive firm, price is also equal to marginal cost. In other words, the firm produces by moving up and down along its marginal cost curve. The marginal cost curve is thus the perfectly competitive firm's supply curve. |
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