To maximize profits, a perfectly competitive firm should produce at an output wh

Question

To maximize profits, a perfectly competitive firm should produce at an output where the difference between price and marginal cost is at its maximum. total cost equals total revenue. price equals marginal cost. total revenue equals variable cost the difference between price and marginal cost is at its maximum. total cost equals total revenue. price equals marginal cost. total revenue equals variable cost the difference between price and marginal cost is at its maximum. total cost equals total revenue. price equals marginal cost. total revenue equals variable cost the difference between price and marginal cost is at its maximum.

Explanation / Answer

To maximize profits, a perfectly competitive firm should produce at an output ( where the difference between price and marginal cost is at its maximum} reason: profit maximization can be identified by a comparison of marginal revenue and marginal cost. If marginal revenue is equal to marginal cost, then profit cannot be increased by changing the level of production. Increasing production adds more to cost than revenue, meaning profit declines. Decreasing production subtracts more from revenue than from cost, meaning profit also declines

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