Since competitive firms are price takers, their profit maximizing problem requires them to choose the quantity which makes:

Question

Quizplus · Accepted Answer

Competitive firms are price takers, therefore, they cannot influence the market price. Therefore, the profit-maximizing level of output is the quantity at which marginal revenue (MR) equals the marginal cost (MC) of producing that unit. Since MC is equal to supply cost (SMC) in the short run, the profit maximizing condition for a competitive firm is to choose the quantity where MR = SMC.

Since Competitive Firms Are Price Takers, Their Profit Maximizing Problem