A perfectly competitive firm will maximize its profit at the level of output where the vertical distance between its total revenue curve and total cost curve is the largest.This is the same level of output where

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In a perfectly competitive market, the firm is a price taker and faces a horizontal demand curve. Therefore, its marginal revenue equals the price of the good. The firm should produce where marginal cost equals marginal revenue (MC=MR) to maximize profit. Additionally, marginal cost is the derivative of total cost, and marginal revenue is the derivative of total revenue. Therefore, the vertical distance between the two curves will be the largest where their respective derivatives are equal i.e. where MR=MC.

A Perfectly Competitive Firm Will Maximize Its Profit at the Level