A perfectly competitive firm finds that for the last shirt that it produces and sells, the marginal revenue is $20 and the marginal cost is $22. The firm should

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Profit maximization occurs where marginal revenue (MR) equals marginal cost (MC). If MR < MC, the last unit produced reduces profit, so the firm should cut back output until MR = MC. 1) Relevant concepts - In perfect competition the firm is a price taker: MR = market price for each additional unit. - Profit-maximizing rule: produce the quantity where MR = MC (or where MR just falls to MC). - If MR > MC, producing an extra unit increases profit; if MR < MC, producing an extra unit decreases profit. - Shutdown rule (related concept): the firm should temporarily shut down only if price (or MR) < average variable cost (AVC), not when AVC < MC. 2) Step-by-step reasoning - Given MR = $20 and MC = $22 for the last shirt. - Compute marginal profit of that last shirt: marginal profit = MR − MC = 20 − 22 = −$2. - A negative marginal profit means the last unit reduced total profit by $2. Reducing output by one unit would increase profit by $2 (all else equal). - The firm should reduce output until the point where MR rises (or MC falls) so that MR = MC. 3) Intermediate calculation shown - MR − MC = 20 − 22 = −2 → negative marginal benefit from the last unit. 4) Why the correct answer is correct - Because MR < MC, the last unit lowers profit. Cutting production removes negatively profitable units and raises overall profit until MR = MC. 5) Why other options are incorrect - "Produce more shirts to increase profit": incorrect; producing more would add units that lose money (MR < MC). - "Shut down if the average variable cost is less than MC": incorrect; the shutdown condition compares price (MR) to AVC (shutdown if MR < AVC), not AVC < MC. - "Hire more workers to increase production": hiring to increase output would exacerbate the loss per extra unit since MC > MR. - "Charge $22 to maximize profit": incorrect in perfect competition because the firm cannot set price; price equals MR (market price), not the firm’s chosen MC. 6) Conclusion Therefore, the firm should produce fewer shirts to increase profit. This matches the provided answer: produce fewer shirts to increase profit.

A perfectly competitive firm finds that for the last shirt that it produces and sells, the marginal revenue is $20 and the marginal cost is $22. The firm should 单项选择题

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