At the positive output level at which a firm under perfect competition maximises its profit, the marginal cost curve must be ____________.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → non-decreasing
At the profit-maximising output, price = MC and the MC curve must be non-decreasing.
If MC were falling there, a slightly smaller output would give more profit, as price is below MC just to the left. Since MC equals the price at that output, the MC curve is neither below nor above the price line there.
NCERT (2026-27): “4.3 Profit Maximisation … For profits to be maximum, three conditions must hold at q0: “4.3.2 Condition 2 … However, at the output level q1, the marginal cost curve is downward sloping. We claim that q1 cannot be a profit-maximising output level. … Observe that for all output levels slightly to the left of q1, the market price is lower than the marginal cost. … the firm’s profit at an output level slightly smaller than q1 exceeds that corresponding to the output level q1. This being the case, q1 cannot be a profit-maximising output level.” |