A firm wishes to maximize its profit, find the correct conditions from the following, that must be held by the firm at $q_0$ at which its profit is maximum.
(A) The price must be less than the average variable cost
(B) The price must be greater than the average variable cost
(C) Marginal cost must be non-decreasing
(D) The price, p, must equal MC
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (C) and (D) only
(A) The price must be less than the average variable cost. False. This is the Shut-Down condition.
(B) The price must be greater than the average variable cost. True.
(C) Marginal cost must be non-decreasing.True.
(D) The price, p, must equal MC. True.