When a company faces a perfectly competitive market and sources its inputs from perfectly competitive markets, if it is producing at a level of output where marginal costs are greater than marginal revenues.
At the output level where MR=MC, a perfectly competitive firm will make the decision that maximizes profits. Through the interaction of market supply and demand, the equilibrium price of raspberries is established at $4.00. The marginal returns start.
At the time where marginal revenue equals marginal cost (MR=MC), a fully competitive firm will maximize profit or minimize loss.
As a result, the firm's profits are maximized when it selects an output level where its marginal revenue and marginal cost are identical.
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