Multiple choice

The firm under perfect competition will be in short-run equilibrium when

  1. Rising marginal cost is equal to the minimum average cost.

  2. Marginal revenue is equal to rising marginal cost.

  3. Average revenue is equal to average cost.

  4. Marginal revenue is equal to the falling marginal cost.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In perfect competition, short-run equilibrium occurs where Marginal Revenue (MR) equals Marginal Cost (MC), and MC must be rising at that point. Option B is correct because firms maximize profit by producing where MR = MC, but only on the rising portion of the MC curve. Option A is incorrect because MC can equal minimum AC without MR being at equilibrium. Option C describes long-run equilibrium with zero economic profit. Option D is wrong because equilibrium requires MC to be rising, not falling.

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