Which of the following constitutes a necessary condition for profit- maximization for a perfectly competitive firm?
A)SMC is equal to price
B)AFC is convex.
C)price is equal to AVC
D)AVC is at a minimum

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm maximizes profits by producing where marginal cost (SMC) equals price. This is because in such a market, the firm is a price-taker and cannot influence the market price. Therefore, it must set its output level such that producing one more unit would cost more than what it would earn in revenue, which is represented by SMC=price. The other options, such as the shape of the average fixed cost curve (AFC), or the level of average variable cost (AVC), do not directly affect the profit-maximizing output level in a perfectly competitive market.

Which of the Following Constitutes a Necessary Condition for Profit-