1 The demand curve faced by a price taking firm is A horizon

1. The demand curve faced by a price taking firm is A. horizontal at the market equilibrium price B. downward sloping C. upward sloping D. vertical 2. If a price-taking firm increases its price slightly, it will A. sell slightly less B. sell the same amount C. sell more D. sell nothing The marginal revenue of the perfectly competitive firm is A. increasing B. decreasing C. constant D. increasing at a constant rate 4. For the perfectly competitive firm, A. MR-0 B. p-MR C. p>MR D. p MR 5. The perfectly competitive firm\'s profit maximizing output level Q is such that A. MR-0 at that output level B. MR

Solution

1)ans is A. Horizontal demand curve means firms cant have any effect on price. Thus in perfectly competitive industry, all firms will take this price as given.

2) ans is D. If price is raised by little there will be no demand because of perfecfly elastic demand curve.

3) ans is C. In perfectly competitive market, firms are price taker and P=MR=AR because price remains same.

4)ans is B. P=MR

5) Profit is maximised when MR=MC and P=MR

Thus P=MC is profit maximisation

Ans is C