A Perfectly Competitive Firm Will Always Maximize Its Profit or Minimize

question 52

Multiple Choice

A perfectly competitive firm will always maximize its profit or minimize its loss by:

• A)setting marginal cost equal to marginal revenue in order to determine the optimal quantity of output.
• B)setting marginal cost above average cost.
• C)setting total cost minus total revenue at its maximum level.
• D)creating a unique product.

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Definitions:

Close Substitutes

Goods or services that can easily replace each other in consumption, offering consumers nearly identical satisfaction.

Natural Monopoly

A market situation where a single firm can supply a good or service to an entire market at a lower cost than could multiple firms.

Minimum Efficient Scale

The smallest scale of production at which long-term average costs are minimized, reflecting the point at which economies of scale are fully exploited.

Exclusive Legal Right

An exclusive legal right is a privilege granted by law to an individual or entity to engage in a particular activity or to use a particular property, which is protected against infringement or unauthorized use by others.