CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If a purely competitive firm seeks to maximize profit, the firm should ______
A. increase output whenever marginal cost is less than average total cost.
B. increase output whenever price exceeds marginal cost.
C. choose the output where per-unit profit is greatest.
Explanation: The purely competitive firm maximizes profit when price is equal to marginal cost. If marginal cost is below price, the firm should expand output until marginal cost rises enough to be equal to price.

User Contributed Comments 3

User Comment
danlan For pure competitive firm, MR=price, so when price exceeds MC, MR also.
GouldenOne Why not A though? If producing another is going to reduce average cost?
001CFA profit, not revenue!
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