Under perfect competition, any profit-maximizing producer faces a market price equal to its:

• A. fixed cost
• B. average total cost
• C. marginal cost
• D. total revenue

Answer: (C)

Verified step by step guidance

1. Understand the setting: In perfect competition, firms are price takers, meaning the market sets the price and individual firms cannot influence it.
2. Recall the profit-maximizing condition: A firm maximizes profit by producing the quantity where marginal cost (MC) equals the market price (P). This is because producing one more unit adds marginal cost, and the firm will produce up to the point where the cost of producing an additional unit equals the revenue gained from selling it.
3. Recognize that fixed costs do not affect the marginal decision since they are sunk in the short run and do not change with output.
4. Average total cost (ATC) is important for determining whether the firm makes a profit or loss, but it does not determine the profit-maximizing output level directly.
5. Total revenue (TR) is the product of price and quantity, but the decision to produce more or less depends on marginal cost and marginal revenue, not total revenue.