Due to the characteristics of the Perfection Competition, firms that want to maximize profits should:

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BlackTom AI · Accepted Answer

Question restatement: The prompt asks what firms in the Perfection Competition should do to maximize profits, given the provided option list.
Option considered: 'focus on reducing costs to increase supply.'
First, recall the core idea of perfect competition: each firm is a price taker and profits are maximized by producing up to the point where marginal cost (MC) equals marginal revenue (MR), which in a perfectly competitive market equals the market price (P). This means the central decision rule is MC = P, not simply 'reduce costs' in isolation.
Why this option is incomplete or flawed: reducing costs can raise profits if it shifts the MC curve downward, but profits are maximized only if the firm expands production up to the point where the additional cost of the last unit produced equals the revenue gained from that unit (i.e., MC = MR). Merely focusing on reducing costs ignores how price interacts with output decisions via the MC curve; if price is below the original MC, reductions in cost may not justify increased output, and misalignment can reduce profits.
Additionally, in the short run or long run, firms may adjust output in response to shifts in price or demand, but the profitability condition remains MC = MR. Simply increasing supply by squeezing costs does not guarantee profit maximization, because increasing supply tends to lower price in a competitive market, which can reduce marginal revenue and alter the optimal output level.
Notes on context and missing options: since the list of answer options is not provided here, we cannot assess alternative statements that might more precisely capture the profit-maximization rule in perfect competition. However, the key takeaway is that profit maximization hinges on equating MC to MR (price), with cost reductions being a means to achieve a lower MC, not an end in itself. 
Overall assessment: the statement 'focus on reducing costs to increase supply' captures a potential driver of profitability but fails to articulate the essential condition for profit maximization (MC = MR) in a perfectly competitive market, and it oversimplifies the relationship between cost, output, and price.

ECON&201 15109 Ch. 8 Assignment

Due to the characteristics of the Perfection Competition, firms that want to maximize profits should:

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