CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

To maximize profits, a perfectly competitive firm should do all of the following except produce until ______

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.
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