Question

For a perfectly competitive firm, which of the following is not true at profit maximization?a. Total revenue minus total cost is maximizedb. Price equals marginal costc. Marginal revenue equals marginal costd. Market price is greater than marginal cost

Answer 1

Answer: Option (d) is correct.

Explanation:

Correct option: Market price is greater than marginal cost.

In a perfectly competitive market, there are large number of buyers and sellers. So, price is determined by the market forces.

At a point of profit maximization, price is equal to the marginal cost and we have to maximize the difference of the total revenue and total cost. It was not seen in a perfectly competitive market that the price is above the marginal cost at a profit maximizing point.

Therefore, option (d) is not true.