Which of the following is NOT a condition for profit maximization of a perfectly competitive firm in the short run?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Average revenue must be rising.
For a perfectly competitive firm in the short run, the conditions for profit maximization are:
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Price (P) = Marginal Cost (MC) — equilibrium condition.
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MC is rising (non-decreasing) at the equilibrium output level.
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Price (P) ≥ Average Variable Cost (AVC) — ensures the firm continues to operate (no shutdown).
However, Average Revenue (AR) is constant and equal to the market price in perfect competition — it is never rising or falling.