The perfectly competitive firm adjusts its level of output in response to changes in the market-
determined price.Figure 9-4 shows the profit-maximizing choice of the firm in two
different ways. In part (i), the firm’s total cost and total revenue curves are
shown, and the profit-maximizing level of output, is the level that
shows the largest positive gap between total revenues and total costs. In
part (ii), the firm’s average and marginal cost curves are shown together
with the market price (which for a price-taking firm equals average and
marginal revenue), and the profit-maximizing level of output, is the
level at which price equals marginal cost. These are two different ways of
viewing the same profit-maximization problem; the value of in part (i)
must be the same as the value of in part (ii).
Q∗,Q∗,Q∗
Q∗