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JAMB Economics 2014 Question 22

Question 22

Market Structures

A perfect competitor will continue to expand output up to the point where

  1. A.MC<MR
  2. B.MC>MR
  3. C.TC>TR
  4. D.MR=AR.
Show the answer and explanation

Answer: A (MC<MR)

Explanation

As long as an extra unit adds more to revenue than to cost (MC < MR), producing it raises profit, so the firm keeps expanding.