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If there is alot of competition (a lot of sellers selling the same good) then the price will fall until it equals Select one:To make profits, price must be higher than the Select one: O a. Average cost O b. total cost O c. Marginal cost

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Answer #1

1. A firm is at equilibrium when it produces such that the Marginal Cost of producing the additional unit = Marginal Revenue that can be earned by its sale. i.e. MC=MR.

since there are large number of sellers, price will be determined by the forces of supply and demand which will be same for all sellers. As more units can be sold at the same price, addition to total revenue (ie. MR) is constant and equal to price. therefore, at equilibrium we have P=MR=MC.

The correct option is MARGINAL COST.

2. profit of a firm is given by total revenue - total cost

= PxQ - ACxQ

= (P-AC)xQ

therefore for profits to be positive, price must be greater than average cost.

the correct option is AVERAGE COST

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