A perfectly competitive firm is maximizing profit if

Question

Quizplus · Accepted Answer

A perfectly competitive firm maximizes profit where marginal cost equals price and price is not below minimum average variable cost. This is the condition where the firm can cover its variable costs and earn economic profits. Option B is incorrect as it mentions average fixed costs which are irrelevant in short-run profit maximization decisions. Options C, D, and E are incorrect because profit maximization is not achieved when total revenue is at a maximum or when average variable cost or average total cost is at a minimum.

A Perfectly Competitive Firm Is Maximizing Profit If