Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To minimize costs
B
To maximize revenue
C
To find the optimal production level where marginal cost equals marginal revenue
D
To increase market share
Understanding the Answer
Let's break down why this is correct
Answer
The primary goal of a firm in a competitive market is to maximize its profits, which means earning as much money as possible while keeping costs low. To do this, firms must carefully analyze their production costs and set prices that attract customers without losing money. For example, if a bakery sells bread, it needs to find the right balance between the cost of ingredients and the price customers are willing to pay. By producing the right amount of bread and managing expenses, the bakery can increase its profits. Ultimately, profit maximization helps firms grow and stay competitive in the market.
Detailed Explanation
The main goal is to produce where the cost of making one more item equals the money earned from selling it. Other options are incorrect because Some might think cutting costs is the only way to make more money; Maximizing sales sounds good, but if costs are higher than sales, the firm loses money.
Key Concepts
profit maximization
Topic
Profit Maximization for Firms
Difficulty
easy level question
Cognitive Level
understand
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