In perfect competition, firms sell more and more Q until MR (marginal revenue) falls to the level of MC (marginal cost). Stated another way, firms sell at the point where MR = MC. Do not confuse MC with AVC; these are different concepts and it is tricky to relate one to the other. When MC is greater than AVC, then AVC increases as output increases; when MC is less than AVC, then ACV decreases as output increases. | In perfect competition, firms sell more and more Q until MR (marginal revenue) falls to the level of MC (marginal cost). Stated another way, firms sell at the point where MR = MC. Do not confuse MC with AVC; these are different concepts and it is tricky to relate one to the other. When MC is greater than AVC, then AVC increases as output increases; when MC is less than AVC, then ACV decreases as output increases. |