Final answer:
The statement “Setting the first order conditions equal to 0 is a sufficient condition for finding a profit maximizing solution” is false.
Step-by-step explanation:
The statement “Setting the first order conditions equal to 0 is a sufficient condition for finding a profit maximizing solution” is False.
To find the profit-maximizing solution, you need to set the marginal revenue (MR) equal to the marginal cost (MC), not the first order conditions. Setting the MR equal to MC helps determine the level of output where the firm maximizes its profits.
For example, if the marginal revenue is greater than the marginal cost, the firm can increase its profits by producing more. On the other hand, if the marginal cost is greater than the marginal revenue, producing less can increase the firm's profits. So, it is the comparison between the MR and MC that determines the profit-maximizing solution, not the first order conditions.