In a competitive market with four firms (indicated as Firm 1, Firm 2, Firm 3, and Firm 4), which of the following is the condition that enables all sellers to maximize profit? A) P = ATC for all firms B) Profit = Total Revenue - Total Cost for all firms C) P = MC₁ = MC₂ = MC₃ = MC₄ D) MC is minimized in all firms.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, all firms are price takers and therefore face the same market price. Therefore, to maximize profit, each firm must produce the quantity where marginal cost equals market price, which is equivalent to the condition P = MC₁ = MC₂ = MC₃ = MC₄. Therefore, choice C is the correct answer. Choices A and D are not necessarily true in a perfectly competitive market, and choice B is a general definition of profit and does not specifically relate to maximizing profit in a competitive market.

In a Competitive Market with Four Firms (Indicated as Firm