A producer aims to produce the level of output at which ______.

both 1 and 2

The correct answer is Option 3: both 1 and 2

A profit-maximizing producer under perfect competition aims to produce the level of output where:

1. MR = MC (Marginal Revenue = Marginal Cost) → Necessary Condition

   • This ensures that the firm is maximizing profit or minimizing losses.
   • If MR > MC, producing more increases profit.
   • If MR < MC, reducing output increases profit.
   • Thus, the equilibrium occurs at MR = MC.

2. MC > MR after MR = MC (Sufficient Condition for Profit Maximization)

   • For equilibrium to be a profit-maximizing point, MC must be rising after MR = MC.
   • If MC is falling, the firm has not yet reached maximum profit and should continue increasing output.
   • Thus, for true equilibrium, MC must be greater than MR after MR = MC.