**
Perfect competition
Competitive firm: Supply curve**

Profit is maximised (or loss minimised) when a firm produces an output where marginal revenue equals marginal cost (more), provided marginal cost is rising and lies above minimum average variable cost AVC.

Under perfect competition, price P is equal to marginal revenue MR and average revenue AR (more). The firm will therefore produce the quantity where P is equal to MC, provided that this occurs where P is equal to, or greater than, AVC (more).

If
the price is P If the price is
P If the price is
P If the price is P If the price is P |