Multiple choice

Which of the following is correct statement?

  1. Under perfect competition, a firm determines its price where AR = MR

  2. In perfect competitive industry, a firm is in equilibrium in the short run only when its AC = AR = MR = MC

  3. The short-run supply curve has a negative slope

  4. A firm is price-taken under perfect competition
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Option D is correct - firms in perfect competition are 'price takers' (the option has a typo 'price-taken' but the concept is correct). In perfect competition, individual firms cannot influence market price and must accept the prevailing price determined by market supply and demand. Options A and B are incorrect statements about equilibrium conditions. Option C is wrong because the short-run supply curve has a positive slope (firms supply more at higher prices).

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