Under perfect market and in case of decreasing marginal cost the firms equilibrium with respect to level of production

BUSINESS ECONOMICS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Under perfect market and in case of decreasing marginal cost the firm’s equilibrium with respect to level of production

A	Can be achieved after a high level of output
B	Can be achieved after a small level of output
C	Will result in run-away inflation
D	Cannot be achieved

Explanation:

Detailed explanation-1: -The firm is in the long-run equilibrium under perfect competition when it does not want to change its equilibrium output. It is earning normal profits. If some firms are earning supernormal profits, new firms will enter the industry and supernormal profits will be competed away.

Detailed explanation-2: -In a market characterized by perfect competition, price is determined through the mechanisms of supply and demand. Prices are influenced both by the supply of products from sellers and by the demand for products by buyers.

Detailed explanation-3: -The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The marginal cost (MC) is equal to the marginal revenue (MR) and the MC curve cuts the MR curve from below.

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GENERAL KNOWLEDGE

GK

BUSINESS ECONOMICS