Question

Assume that, for a perfectly competitive firm, marginal cost equals average variable cost at $10, marginal cost equals average total cost at $15, and marginal revenue equals marginal cost at $12. On the basis of this information, the firm should:

Answer 1

Answer: The firm should produce more output when marginal cost equals marginal revenue.

Explanation: A business can maximize it's profit by producing at a level where marginal cost equals marginal revenue. As long as the Marginal revenue is not lower than marginal cost the firm can produce more to maximize their profit.