A firm in a perfectly competitive market maximizes profits when it finds

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In a perfectly competitive market, firms face a horizontal demand curve, which means that they have no pricing power. Therefore, the firm can only maximize profits by producing the quantity at which total revenue minus total cost is the greatest, or equivalently, the quantity at which marginal revenue equals marginal cost. This is because producing more or less than this quantity would lead to lower profits, as marginal revenue would be less than marginal cost. Therefore, the maximum profit is achieved at the quantity where the difference between total revenue and total cost is the greatest.

A Firm in a Perfectly Competitive Market Maximizes Profits When