In general, perfectly competitive firms maximize profit if they produce a level of output at which:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and therefore, the price of the good is given. To maximize profit, the firm should produce at a level of output where the marginal cost equals price. This is because producing a unit of output at a lower cost than the price would increase profit, while producing a unit of output at a higher cost than the price would decrease profit. Therefore, the firm maximizes profit where it produces at the point where marginal cost equals price.

In General, Perfectly Competitive Firms Maximize Profit If They Produce