Question

1. In perfect competition, the price of the product is determined where the market

		average variable cost equals the market average total cost.
		fixed cost is zero.
		elasticity of supply equals the market elasticity of demand.
		supply curve and market demand curve intersect.

2.

At the profit-maximizing level of output for a perfectly competitive firm, price equals marginal cost. Which of the following is also true?

		Average revenue equals average total cost.
		The difference between total revenue and total cost is the greatest.
		Total revenue equals total cost.
		Marginal profit equals marginal cost.

3.

In perfect competition, the marginal revenue of an individual firm

		equals the price of the product.
		exceeds the price of the product.
		is zero.
		is positive but less than the price of the product.

4.

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

		decrease its output to increase its profit.
		immediately shut down for the short run.
		increase its output to increase its profit.
		be maximizing profits.

Answer 1

1.The price of product in a competitive market is determined at the intersection of market demand and supply curves.

Answer-Last option

2.At the profit maximizing level of output the difference between total revenue and total cost is the highest.

Answer-Second option

3.The P=MR=AR=D for a competitive firm.

MR=Marginal Revenue

AR=Average Revenue.

Answer-First option

4.When P<MC the firm is not maximizing profits.So,it reduces production so that MC falls.

Answer-First option