Microeconomics: The Theory of the Firm under Perfect Competition · Class 11 · CBSE · Commerce Economics
A perfectly competitive firm faces a price of ₹10 per unit. The marginal costs of its first four units are ₹6, ₹8, ₹10 and ₹13, respectively. Assumin…
Practice question from Microeconomics: The Theory of the Firm under Perfect Competition (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · MCQ · Q-761A4F
A perfectly competitive firm faces a price of ₹10 per unit. The marginal costs of its first four units are ₹6, ₹8, ₹10 and ₹13, respectively. Assuming marginal cost is rising, what output level maximises the firm's profit?
- A.1 unit
- B.2 units
- C.3 unitsCorrect answer
- D.4 units
Solution
Under perfect competition, . Profit is maximised where and MC is rising. The third unit has MC equal to ₹10, while the fourth unit has MC greater than ₹10, so the firm produces 3 units.
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