Answer to Question #171658 in Microeconomics for Reeha

Question

Does a perfectly competitive firm’s price equal marginal cost in the short run, long run, or both?

Answer 1

A perfectly competitive firm’s price equals marginal cost in both the short run and the long run. Also, the competitive firm’s price equals marginal revenue in both the short run and the long run. As a result, the firm should increase its output as long as marginal revenue greater than the marginal cost and the firm's maximum profit will occur when $MR=MC$.