or 100 packs, then it can increase profit by reducing output because the reductions in marginal cost will

exceed the reductions in marginal revenue. The firm’s profit-maximizing choice of output will occur where MR

= MC (or at a choice close to that point).

FIGURE 8.3 Marginal Revenues and Marginal Costs at the Raspberry Farm: Individual Farmer For a perfectly

competitive firm, the marginal revenue (MR) curve is a horizontal line because it is equal to the price of the good,

which is determined by the market, as Figure 8.4 illustrates. The marginal cost (MC) curve is sometimes initially

Access for free at openstax.org
8.2 • How Perfectly Competitive Firms Make Output Decisions 193

downward-sloping, if there is a region of increasing marginal returns at low levels of output, but is eventually

upward-sloping at higher levels of output as diminishing marginal returns kick in.
{"producer": "Prince 14.2 (www.princexml.com)", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "total_pages": 597, "creator": "PDFMiner", "file_type": ".pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:37:44.339247", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "creationdate": "2022-12-07T14:15:44-06:00"}