Marginal cost essential for profit maximization

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1. Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? Explain why price can be substituted for marginal revenue in the MR = MC rule when an industry is purely competitive.

2. "Even if a firm is losing money, it may be better to stay in business in the short run." Is this statement ever true? Under what condition(s)?  How does this relate to the "shut-down rule?"

3. Strictly speaking, perfect competition is relatively rare. Then why study it?

Reference no: EM131400588

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