A perfectly competitive firm that is maximizing profit produces the quantity of output at which price equals marginal cost.

Question

Quizplus · Accepted Answer

This is the basic principle of profit maximization for perfectly competitive firms. At the quantity of output where price equals marginal cost, the firm is producing at the point where it can no longer increase profit by producing more or less. Any deviation from this quantity would either result in higher costs or lower revenues, reducing the overall profit.

A Perfectly Competitive Firm That Is Maximizing Profit Produces the Quantity