A perfectly competitive firm will maximize profits at the ou

A perfectly competitive firm will maximize profits at the output level where which of the following is true?

A

Average cost is equal to marginal revenue

B

Marginal cost is total revenue

C

Marginal cost is equal to marginal revenue

D

Average total cost is equal to average revenue

Solution

A perfectly competitive firm will maximize profits at the output level where which of the following is true?

Answer

C. Marginal cost is equal to marginal revenue (MR = MC)

MR = MC

This is the very fundamental rule to find out the output level where the firm gets maximum profit in a perfectly competitive market. The marginal cost must intersect the marginal revenue from below. At the this output level the firm gets maximum profit.