If there is a positive level of output at which a firm's profit is maximised in the short run, that condition must not hold at that output level.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Price = Short run Average Cost.
If a firm’s profit is maximised at a positive level of output in the short run, then:
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Price = Short run Marginal Cost must hold — this is the profit-maximising condition under perfect competition.
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Short run Marginal Cost is non-decreasing at the profit-maximising level — this ensures we are at a minimum point or rising cost.
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Price ≥ Average Variable Cost — this condition ensures the firm continues to produce in the short run and does not shut down.
However, Price = Short run Average Cost does not have to hold when profit is maximised. In fact, if P = SAC, the firm earns zero economic profit. Therefore, this condition need not hold at the profit-maximising level — making it the correct answer.