A perfectly competitive firm will maximise its profit at the rate of output where the vertical distance between its total revenue and total cost is the largest.This is the same rate of output where
A)average total cost equals marginal revenue.
B)marginal revenue equals marginal profit.
C)marginal revenue equals marginal cost.
D)marginal revenue equals average revenue.

Question

Quizplus · Accepted Answer

A perfectly competitive firm maximizes its profit where marginal revenue equals marginal cost. This is because at this point, the firm is producing the quantity where the cost of producing an additional unit (marginal cost) is equal to the additional revenue earned from selling an additional unit (marginal revenue). This ensures that the firm is not spending more to produce the last unit than it is earning from selling it, maximizing its profit.

A Perfectly Competitive Firm Will Maximise Its Profit at the Rate