GENERAL KNOWLEDGE

GK

BUSINESS ECONOMICS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The firm under perfect competition will be in short-run equilibrium when
A
Average revenue is equal to average cost
B
Marginal revenue is equal to rising marginal cost
C
Marginal revenue is equal to the falling marginal cost
D
Rising marginal cost is equal to the minimum average cost
Explanation: 

Detailed explanation-1: -A perfectly competitive firm is in equilibrium where marginal cost is equal to marginal revenue because: it cannot determine the prices and demand of the products it offers. At this point, the price of the product will be equal to both average total cost of each product and marginal cost.

Detailed explanation-2: -In a perfectly competitive market, price always equals marginal revenue because no matter how many units are sold the market price is always added to the total revenue. Therefore, when we say that price equals marginal revenue, we are also saying the marginal revenue equals marginal cost.

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