If the firm should increase output when MR > MC and decrease when MR < MC, then the firm can only be in equilibrium when MR = MC . Anytime these two aren't equal, the firm can increase its profitability by changing its behavior.

   A typical marginal cost curve is shown to the right. We have learned that for a single perfectly competitive firm the demand curve is also the marginal revenue curve, and that demand and marginal revenue are equal to market price.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved