Question 9: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.
Question 9:
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 answers
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 profit-maximisation, 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
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