Question

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing A. to produce the quantity at which average fixed cost is minimized. B. the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount. C. the quantity at which market price is equal to Mr. McDonald's marginal cost of production. D. to produce the quantity at which average variable cost is minimized.

Answer 1

Answer:C. the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

Explanation: In a perfectly competitive market, the firm's demand curve is the firm's marginal revenue curve. The firm maximizes profits by producing where MR (marginal revenue) = MC(marginal cost).