A perfectly competitive firm maximizes its profit by producing at the point where

Question

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In perfect competition, the firm is a price-taker and faces a horizontal demand curve. Thus, the firm can sell any quantity at the given market price. To maximize profit, the firm should produce the quantity where marginal revenue (MR) equals the marginal cost (MC). This is because when MR>MC, the firm can increase profit by producing more and when MR<MC, the firm can increase profit by producing less. Therefore, the optimal production quantity is where MR=MC.

A Perfectly Competitive Firm Maximizes Its Profit by Producing at the Point