The competitive firm maximizes its profit by operating at the point where _____ and price is greater than average variable cost.
A)average cost is at a minimum
B)total revenue is at a maximum
C)profit per unit is at a maximum
D)marginal cost equals price

Question

Quizplus · Accepted Answer

A competitive firm maximizes its profit by producing the quantity of output at which marginal cost equals the price of the product, as long as the price is above the average variable cost. This is because, in competitive markets, firms are price takers and can sell as much as they want at the market price. The condition where marginal cost equals price ensures that the firm is producing at an efficient scale where it cannot increase profit by altering production.

The Competitive Firm Maximizes Its Profit by Operating at the Point