Determination of Equilibrium Price and Output Under Perfect Competition

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  • Q1

    Where we will draw the AC curve in case of normal profit?

    Marks:1
    Answer:

    In case of normal profit, AC curve will be drawn at the price line.

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  • Q2

    Where we will draw the AC curve in case of super normal profits?

    Marks:1
    Answer:

    In case of super normal profits, AC curve will be drawn below the price line.

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  • Q3

    What is perfect competition?

    Marks:1
    Answer:

    Perfect competition is a market situation where there are a large number of buyers and sellers in the market, buying and selling homogeneous commodities.

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  • Q4

    What is the supply curve of a firm in the short-run under perfect competition?

    Marks:1
    Answer:

    That part of the short-run MC curve which lies above the minimum point of the AVC curve is the supply curve of the firm in the short-run under perfect competition.

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  • Q5

    Define a Firm and an Industry under perfect competition.

    Marks:1
    Answer:

    Firm refers to unit of an industry whereas an Industry refers to group of firms. Under perfect competition, industry is the price maker and firm is a price taker.

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