Q. In perfect competition, when the marginal revenue and marginal cost are equal, profit is:
Answer: Maximum
Notes: In perfect competition, when the marginal revenue and marginal cost are equal, profit is maximum. In order to maximize profits in a perfectly competitive market, firms set marginal revenue equal to marginal cost (MR = MC). MR is the slope of the revenue curve, which is also equal to the demand curve (D) and price (P). When price is greater than average total cost, the firm is making a profit.