- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 3. Marginal Revenue, Marginal Cost and Profit Maximization
CFA Practice Question
To maximize profits, a perfectly competitive firm should do all of the following except produce until ______
II. marginal cost equals price.
III. marginal revenue equals marginal cost.
IV. per unit profits are maximized.
I. economic profits are maximized.
II. marginal cost equals price.
III. marginal revenue equals marginal cost.
IV. per unit profits are maximized.
A. I and IV
B. II and III
C. IV only
Explanation: Total profits are not maximized when per unit profits are maximized. They are maximized when MR = MC.
User Contributed Comments 6
| User | Comment |
|---|---|
| surob | Pay attention to the word "except" |
| micheleus | The profit-maximizing quantity of output occurs where MC = MR = P. |
| barrosm | There is no economic profit for a perfectly competitive firm so it is impossible to maximize it. |
| smit0745 | an economic profit of 0 is maximizing economic profit for a perfectly competitive firm |
| sahilb7 | oh that tricky "except"! |
| DRamirez | "except" got me again. |