Why is the equality of marginal revenue and marginal cost

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1. Strictly speaking, pure competition never has existed and probably never will. Then why study it?

2. Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? Explain your reasoning.

3. Suppose that purely competitive firms producing cashews discover that price exceeds marginal cost. Will their combined output of cashews be too little, too much, or just right to achieve allocative efficiency? In the long run, what will happen to the supply of cashews and the price of cashews?

Reference no: EM13233976

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