Can there be a positive level of output that a profit-maximising firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation.
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Answer:
No. There cannot be a ‘positive level of output’ that a profit-maximizing firm produces in a ‘competitive market’ at which ‘market price’ is not equal to ‘marginal cost’.
Explanation:
This is not possible since there needs to be equality in the market price and marginal cost. It is a necessary requirement for the competitive organization to be in equilibrium. The ‘market price’ is equal to ‘marginal revenue’ during perfect competition when the price remains fixed at all output levels.
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