The correct answer is Option (4) → (A), (B) and (D) only
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(A) Price = Short run marginal Cost: Correct. In a perfectly competitive market, the firm is a price taker, meaning its marginal revenue (MR) is equal to the market price (P). The primary condition for profit maximization is that marginal revenue equals marginal cost (MR = MC). Therefore, for a perfectly competitive firm, this condition becomes P = MC.
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(B) Short Run marginal cost curve is non-decreasing: Correct. This is a crucial second-order condition. The firm will only maximize profit at the point where the marginal cost curve is rising (non-decreasing). If the marginal cost were still falling at the point where MR=MC, the firm could increase its profit by producing more output, as each additional unit would be costing less to produce than it is generating in revenue.
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(D) Price ≥ Average variable cost: Correct. This is the firm's short-run shutdown condition. A firm will only continue to produce in the short run if the price it receives for its product is at least enough to cover its average variable costs. If the price falls below the average variable cost, the firm is losing money on every unit produced and would minimize its losses by shutting down immediately.
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(C) Price ≤ Marginal Cost: Incorrect. Profit maximization occurs when Price = MC, not when Price is less than MC.
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