Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 14 - Part V - Firms in Competitive Markets - Questions for Review - Page 296: 6

Answer

Long run

Work Step by Step

A firm will maximize profit by choosing a quantity of output so that the marginal revenue is the same as the marginal cost. Since marginal revenue is the market price (for competitive firms), the firm chooses a quantity so that the price is the same as the marginal cost. In the short run, firms will not compete if the price is less than the marginal cost.
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