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Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? Explain why the price can be substituted for marginal revenue in the MR=MC rule when an industry is purely competitive.

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019
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Related questions

1. Strictly speaking, pure competition never has existed andprobably never will. Then why study it?

2. Why is the equality of marginal revenue and marginal costessential for profit maximization in all market structures? Explainyour reasoning.

3. Suppose that purely competitive firms producing cashews discoverthat price exceeds marginal cost. Will their combined output ofcashews be too little, too much, or just right to achieveallocative efficiency? In the long run, what will happen to thesupply of cashews and the price of cashews?

(a) List and explain three characteristics of the marginal revenue/marginal cost (MR-MC) approach to determining the profit-maximizing output and price for the purely competitive firm.

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2. What is the profit-maximizing rule for firms? Explain why it makes sense. For a purely competitive firm, price equals marginal revenue. What is the profit-maximizing rule for purely competitive firms? Can you see why, if the price is set by the market and the firm

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