Multiple choice

A competitive firm maximizes profit at the output level, where

  1. price equals marginal cost

  2. the slope of the firm's profit function is equal to zero

  3. marginal revenue equals marginal cost

  4. all of the above

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Profit maximization occurs where the slope of the profit function is zero (condition B), which mathematically means Marginal Revenue equals Marginal Cost (condition C). For a competitive firm, Price equals Marginal Revenue, so Price = Marginal Cost is also true (condition A). All three conditions represent the same optimization principle from different angles.

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