2019 · Q12
Which one of the following is NOT correct?
indian-polity-economyeconomy-fundamentals
- AThe Average Revenue and Marginal Revenue curves of a perfectly competitive firm are perfectly elastic
- BThe Marginal Revenue curve of the monopoly firm is above its Average Revenue curve
- CIn the long-run, a competitive firm earns only normal profits
- DIn equilibrium, the Marginal Cost Curve of the monopoly firm may be rising, falling or constant
Explanation
In perfect competition AR equals MR and both are horizontal (perfectly elastic) - A is correct. For a monopoly the demand (AR) curve slopes downward and MR lies below AR, so statement B (MR above AR) is NOT correct. C and D are standard results: competitive firms earn only normal profit in the long run, and a monopolist's MC may be rising, falling or constant at equilibrium. Hence B.