A competitive firm maximizes profit where the world price is equal to which of the following?

A competitive firm maximizes profit by producing output where the world price is equal to marginal cost. This relationship is fundamental in the theory of perfect competition.

In a competitive market, firms are price takers, meaning they cannot influence the market price and must accept the prevailing world price for their products. Profit maximization occurs at the level of output where the additional cost of producing one more unit (marginal cost) is equal to the revenue generated from selling that unit (which is represented by the world price). If the price is above marginal cost, the firm can increase its profits by producing more units, thereby generating more revenue. Conversely, if the price is below marginal cost, the firm would incur losses on additional production and should reduce output.

Thus, setting the price equal to marginal cost ensures that the firm is maximizing its profits by producing the optimal quantity of goods in alignment with market conditions.