Question

What are the ‘first order’ and ‘second order’ conditions which must be satisfied for the profit to be maximum?

Answer 1

The first order condition is a basic requirement for a firm’s equilibrium; it means Marginal Cost (MC) must equal Marginal Revenue (MR).
However, this alone is not enough to guarantee maximum profit, because profit may not be maximised even when MC = MR.

The second order condition is an additional requirement, it states that the MC curve should cut the MR curve from below, meaning MC should be rising at the point of intersection.

When both conditions are satisfied together, they form the complete (necessary and sufficient) conditions for profit maximisation.