Concept:Profit is maximized when the additional revenue from one more unit equals the additional cost of producing that unit.
Explanation:In a perfectly competitive market, the firm is a price taker.
Therefore, marginal revenue equals average revenue and the market price:
MR=AR=P.
The profit-maximizing output is where marginal cost equals marginal revenue:
MC=MR.
If
MC<MR, producing an extra unit adds more to revenue than to cost, so profit increases with more output.
If
MC>MR, producing an extra unit costs more than it earns, so profit increases when output is reduced.
Thus, maximum profit is achieved only when
MC=MR.
In perfect competition, this also means
MC=MR=AR=P.
The other options do not state the standard profit-maximizing condition for a perfectly competitive firm.
Answer:C.
MC=MR