A firm wishes to maximize its profit, find the correct conditions from the following, that must be held by the firm at q₂ at which its profit is maximum.

(A) The price must be less than the average variable cost

(B) The price must be greater than the average variable cost

(C) Marginal cost must be non-decreasing

(D) The price, p, must equal MC

Choose the correct answer from the options given below:

Option 1 -> Incorrect combination including condition (A) which states price must be less than AVC - this would lead to shutdown, not profit maximization.

Option 2 -> Incorrect combination including condition (A) and excluding condition (B), which reverses the correct price-AVC relationship.

Option 3 -> Incorrect as it includes both (A) and (B) which contradict each other regarding the price-AVC relationship.

Option 4 -> Includes (B), (C), and (D) which are the three necessary conditions for profit maximization.

Hence, Option 4: (B), (C) and (D) only -> For profit maximization at q₂, three conditions must hold: (B) Price must exceed average variable cost (P > AVC) - this is the shutdown condition; if violated, the firm should cease production. (C) Marginal cost must be non-decreasing (dMC/dq ≥ 0) - this is the second-order condition ensuring we have a maximum, not a minimum. (D) Price must equal marginal cost (P = MC) - this is the first-order condition where marginal revenue equals marginal cost. Condition (A) is incorrect because if P < AVC, the firm cannot cover variable costs and should shut down rather than maximize profit. -> correct