Answer: Price of a good equals marginal cost of production for competitive and profit maximizing firms.
Explanation:
A perfectly competitive market has two main characteristics which are many buyers and sellers in the market and the goods are identical. Due to these conditions, actions of any single buyer or seller have a negligible effect on the market price. Every buyer and seller accept the price as determined by the market, hence, are known as price takers.
The profit-maximizing output level is gotten when marginal revenue and marginal cost are equal. For a given price, the profit maximizing output level of the competitive firm is found when price intersects with the marginal cost curve.
