Microeconomics › Section H · Perfect competition › Topic H.2
How a competitive firm chooses output
A price taker cannot choose its price - so the whole strategy of the firm collapses into one number: how much to produce. The answer follows a marginal comparison older than economics itself: keep going while the next unit earns more than it costs, and stop exactly where the two meet.
In this topic
- One decision, made at the margin
- The rule: produce where MR = MC
- Worked example: finding the profitable quantity
- Measuring the profit
- Producing at a loss: the shutdown rule
- Worked example: comparing two losses
- The firm's supply curve, revealed
- Why supply slopes upward: the unified story
- Averages decide nothing
- Common mistakes to avoid
- Key takeaways
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