For a perfectly competitive firm, at profit maximisation
A)market price exceeds marginal cost.
B)total revenue is maximised.
C)marginal revenue equals marginal cost.
D)production must occur where average cost is minimised.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm maximises its profits by producing at the level of output where marginal revenue (MR) equals marginal cost (MC). This is because in such a market, the price of the good is given and the firm is a price taker, so if it charges a higher price than the market price, it won't be able to sell any units and if it charges a lower price, it will not make a profit. Therefore, at the profit maximising level of output, total revenue (TR) minus total cost (TC) is maximised, which is equivalent to the difference between MR and MC being at its maximum. Hence, the correct option is C.

For a Perfectly Competitive Firm, at Profit Maximisation