1. Which of the following are the characteristic properties of a long-run equili

Question

1. Which of the following are the characteristic properties of a long-run equilibrium in a perfectly competitive market?

a. MC = LAVC

b. MC =MR

c. MR = P

d. P > LATC

e. P = AFC + AVC

f. P > AVC

g. MC = ATC

h. AVC > MR

i. MR = LATC

j. P = MC

K. MC = LATC

2. Which of the following defines a monopoly's profit?

a. TR - MC*Q - AVC*Q

b. TR - TC

c. P*Q - MC*Q

d. P*Q - (AVC+AFC)*Q

e. TR - ATC*Q

f. MR*Q - ATC*Q

g. MR*Q - (AFC+AVC)*Q

h. P*Q - AVC*Q

i. TR - P*Q

j. P*Q - TFC -TVC

k. MR*Q - TFC -TVC

Explanation / Answer

1. Which of the following are the characteristic properties of a long-run equilibrium in a perfectly competitive market?

In the long run perfectly competitive equilibrium, all firms are earning zero profits and operating at the most efficient scale of production, i.e. P=MR = MC=min ATC. Since AVC lies below ATC, P=MR>AVC. ATC=AFC+AVC.

a. MC = LAVC

b. MC =MR

c. MR = P

d. P > LATC

e. P = AFC + AVC

f. P > AVC

g. MC = ATC

h. AVC > MR

i. MR = LATC

j. P = MC

K. MC = LATC

2. Which of the following defines a monopoly's profit?

A monopolists profit is given by, Profit = TR-TC = TR

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