A Perfectly Competitive Firm Maximizes Its Profit by Producing at the Point

question 263

Multiple Choice

A perfectly competitive firm maximizes its profit by producing at the point where

• A) total revenue equals total cost.
• B) marginal revenue is equal to marginal cost.
• C) total revenue is equal to marginal revenue.
• D) total cost is at its minimum.
• E) total revenue is at its maximum.

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Definitions:

Break-Even Point

The level of production or sales at which total revenues are equal to total costs, resulting in no net loss or gain.

Variable Cost

Costs that vary directly with the level of production or output, such as materials and labor, in contrast to fixed costs which remain constant regardless of output.

Total Cost

The total of all costs associated with the creation of goods or services, encompassing both fixed and variable expenses.

Average Variable Cost

Average Variable Cost is the total variable costs (costs that change with the level of output) divided by the quantity of output produced, representing the cost of producing one additional unit of goods or services.