Use app×
Join Bloom Tuition
One on One Online Tuition
JEE MAIN 2025 Foundation Course
NEET 2025 Foundation Course
CLASS 12 FOUNDATION COURSE
CLASS 10 FOUNDATION COURSE
CLASS 9 FOUNDATION COURSE
CLASS 8 FOUNDATION COURSE
0 votes
1.4k views
in Economics by (60.8k points)

Will a profit-maximising firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.

1 Answer

0 votes
by (150k points)
selected by
 
Best answer

It is not possible for any perfect competitive firm to produce a positive level of output in a range where MC is falling. This is because, according to one of the conditions of profitmaximization, MC curve should be upward sloping or the slope of MC curve should be positive at the equilibrium level of output. 

Let us take an example: At point Z price is equal to MC, but MC is falling and is negatively sloped. For any level of output more than Oq0, the firm is facing price > MC, which implies that the profit can be maximized by increasing the output level further.

Hence, the point 'E' is the equilibrium point, where a profit maximising firm would operate
and produce Oq1 units of output and its profit will be maximized.

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

Categories

...