Question

Incorrect Question 2 0/5 pts Assume that a firm is operating in a perfectly competitive market at its shut-down level of output. Which of the following statements is false? Marginal cost and average revenue are equal Marginal cost and average variable cost are equal Marginal cost and marginal revenue are eque none of the options

Answer 1

In the case of a perfectly competitive market, Price= Average Revenue= Marginal Revenue.

If the form is operating in a perfectly competitive market at its shut down level of output, then at that level of output, Price= minimum of Average Variable Cost.

In a perfectly competitive market, the profit is maximised when the marginal cost is equal to price even if a firm is Operating in at its shut down level of output. So, it also means that Marginal cost is equal to average revenue since price is equal to average revenue in perfect Competition. First statement is not false.

It may happen that at the shut down level of output, marginal cost and average variable cost are equal because at shut down level of output, Price= Minimum Average Variable Cost and Price= Marginal Cost. So, Marginal Cost= Average Variable Cost. Hence, second statement is also not false.

Since, average revenue is equal to marginal revenue. Third statement becomes equal to first statement. Hence, third statement is also not false.

Therefore, none of the above given statements are false.

Hence, fourth option is correct i.e, none of the options.