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True or False: Price equals marginal cost is a sufficient condition for profit maximization.

1 Answer

6 votes

Answer:

False

Step-by-step explanation:

The profit maximizing rule is the rule in which the Marginal cost is equivalent to the Marginal revenue

i.e.

Marginal revenue = Marginal cost

MR = MC

In the case of perfect competition,

P = MC

Price = Marginal cost

For the firms that are price maker, in this the demand is downward and the marginal revenue is below to the demand curve

So

in this,

The price > MR = MC

Therefore this is not a sufficient condition

Hence, the given statement is false

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