Question

1)In a perfectly competitive industry the market is in long-run equilibrium, when:

Group of answer choices

a)P=MR=MC=AC

b)P=MR=MC<AC

c)P=MR=MC>AC

d)P>MR=MC=AC

2)In order for a firm producing and selling kitchen tables to be operating at allocative efficiency, when price equals $800, marginal cost must equal _____.

Group of answer choices

a)$750

b)$800

c)$850

d)$700

Answer 1

1.

a)P=MR=MC=AC

explanation:

in perfect competition, firm maximizes its profit where MR=MC and firm are price takers so, P=MR. in the long run, in perfect competition firm makes zero economic profit thus,P=ATC or TR=TC. so, in the long run firm produce at P=MR=MC=AC.

2.

b)$800.

Explanation:

allocative efficiency means the quantity socity most desires. it happens when firm produce where demand intersects MC curve. in perfect competition Price=MR=MC. so here price is $800 so MC cost will be also $800.