Final answer:
In a perfectly competitive market, a firm's marginal revenue does not change when it alters its output because it equals the market price, which is determined by supply and demand. The firm can sell all its goods at this price, and profitability is determined by the relationship between price and average cost at the output level where MR equals MC.
Step-by-step explanation:
When analyzing the economics of a perfectly competitive firm, one key point to understand is the behavior of marginal revenue (MR) when the firm adjusts its level of output. In a perfectly competitive market, the marginal revenue remains constant no matter the output level. This constancy is because the price of the good is set solely by market supply and demand forces and is given to the individual firm, which, due to its small size relative to the market, does not have the power to influence this price by altering its own supply.
A perfectly competitive firm finds its profit-maximizing level of output where marginal revenue equals marginal cost (MR = MC). In this scenario, marginal revenue will not change with an increase in output because it is equal to the market price (MR = P). Consequently, the firm can sell any quantity of goods at this set price. Profit-making or loss will depend on whether the market price lies above or below the average cost at the profit-maximizing output level.