Which of the following relationships correctly identifies the profit-maximizing condition of a firm that sells a divisible good in a perfectly competitive market?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm sells a homogeneous product, meaning the price is uniform across the entire market. Therefore, the firm cannot influence the price of the product. Hence, the profit maximizing condition for such a firm would be to produce up to the point where its marginal cost equals its marginal revenue, which is equivalent to the price. This is because, in a competitive market, the marginal revenue equals the price of the product. Therefore, the correct answer is (C) Marginal cost = Price = Marginal revenue.

Which of the Following Relationships Correctly Identifies the Profit-Maximizing Condition