If a firm operating in a perfectly competitive industry maximizes short-run profits by producing some quantity...
If a firm operating in a perfectly competitive industry maximizes short-run profits by producing some quantity of output q* > 0, which of the following must be true at that level of output?
A) p > MC
B) MR > MC
C) p ≥ AVC
D) All of the above
E) B and C only
Homework Answers
Answer : The answer is option C.
For perfectly competitive firm the profit maximizing output
level is that output level where P (Price) = MC (Marginal Cost).
For perfectly competitive firm P = MR (Marginal Revenue). So, at
profit maximizing output level P = MR = MC for perfectly
competitive firm. Now if the perfectly competitive firm earn
maximum short run economic profit then definitely at profit
maximizing output level P 
AVC (Average
Variable Cost). Therefore, option C is correct.
Add Answer to:
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