Question:
The equilibrium of a firm under perfect competition will be determined when
The equilibrium of a firm under perfect competition will be determined when
Show Hint
The profit-maximising rule MR = MC applies to firms in any market structure, including perfect competition.
Updated On: Jul 16, 2026
- Marginal Cost > Average Cost
- Marginal Revenue > Average Cost
- Marginal Revenue > Average Revenue
- Marginal Revenue = Marginal Cost
Show Solution
Verified By Collegedunia
The Correct Option is D
Solution and Explanation
Concept:
Every firm, regardless of the market structure it operates in, maximises its profit at the output level where the extra revenue from selling one more unit equals the extra cost of producing that unit.
Explanation:
A firm under perfect competition is a price taker, so its Average Revenue (price) equals Marginal Revenue, both shown as a horizontal line at the market price. Even so, the firm still reaches its equilibrium (profit-maximising) output at the point where Marginal Revenue equals Marginal Cost, provided the Marginal Cost curve is rising through this point from below, which is the standard condition of profit maximisation used across all market structures. Simply having MC greater than AC, or MR greater than AC, or MR greater than AR does not pin down a unique output level, they are either always true past a certain output or, in the case of MR greater than AR, not even true for a perfectly competitive firm since MR equals AR throughout.
Final Answer:
Equilibrium output for a competitive firm is where MR = MC, so option D is correct.
Every firm, regardless of the market structure it operates in, maximises its profit at the output level where the extra revenue from selling one more unit equals the extra cost of producing that unit.
Explanation:
A firm under perfect competition is a price taker, so its Average Revenue (price) equals Marginal Revenue, both shown as a horizontal line at the market price. Even so, the firm still reaches its equilibrium (profit-maximising) output at the point where Marginal Revenue equals Marginal Cost, provided the Marginal Cost curve is rising through this point from below, which is the standard condition of profit maximisation used across all market structures. Simply having MC greater than AC, or MR greater than AC, or MR greater than AR does not pin down a unique output level, they are either always true past a certain output or, in the case of MR greater than AR, not even true for a perfectly competitive firm since MR equals AR throughout.
Final Answer:
Equilibrium output for a competitive firm is where MR = MC, so option D is correct.
Was this answer helpful?
0
0
Top SNAP General Knowledge Questions
- Name the jailed Chinese pro-democracy activist who won this year's Nobel Peace Prize for his 'long and non-violent struggle for fundamental human rights in China.'
- Which government is behind the 'The Nalanda Proposal' proposing Nalanda as an ideal site for establishing a 21st century learning institution.
- Jimmy Wales and Larry Sanger are known for founding
- The year 2010 is represented in Roman Numerals as
- In which country is the seat of the United Nations International Court of Justice?
View More Questions
Top SNAP Economics Questions
Top SNAP Questions
- In a retail outlet, the average revenue was Rs.10,000 per day over a 30 day period. During this period, the average revenue on weekends (total 8 days) was Rs. 20,000 per day. What was the average daily revenue on weekdays?
- Two different prime numbers X and Y, both are greater than 2, then which of the following must be true?
- It takes 6 hours for pump A, used alone, to fill a tank of water. Pump B alone takes 8 hours to fill the same tank. A, B and another pump C all together fill the tank in 2 hours. How long would pump C take, used alone, to fill the tank?
- A swimming pool can be filled by pipe A in 3 hours and by pipe B in 6 hours, each pump working on its own. At 9 am, pump A is started. At what time will the swimming pool be filled if pump B is started at 10 am?
- The sum of prime numbers that are greater than 60, but less than 70 is :
View More Questions