How do firms maximize profits in Perfect Competition?
Profits are maximized when Marginal Cost = Marginal Revenue. Perfect competition is very rare, difficult to find in the economy, because many products are “differentiated”, sometimes simply because of “branding”. You might use pizzas as an example though. This doesn’t address all of your request, but here’s some good info. http://www.investopedia.com/exam-guide/c… Good luck on your report. PS To answer your question, “how do they make money?’ – they make money by selling their product for more than it costs to make. Profits are maxed when marginal revenue (the revenue from the NEXT pizza they would make) would equal marginal cost (the NEXT cost of making that pizza). As you can see, they wouldn’t make money on that pizza…profits are maxed.
