Micro Economics: Theory of Firms under Perfect Competition
Question:
Under perfect competition, a producer's equilibrium is determined when ____________.
Options:
MR>MC
MR<MC
MR= MC
All of the above
Correct Answer:
MR= MC
Explanation:
The correct answer is option 3: MR= MC
A producer's equilibrium (or profit-maximizing output) occurs when Marginal Revenue (MR) = Marginal Cost (MC).
This is the point where the firm maximizes its profit or minimizes its losses, as producing more or less than this level would either reduce profit or increase losses.
