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Question
State, with valid reasons, which of the following statements are true or false:
a. Average Revenue curve under the Perfect Competition is a downward sloping curve.
b. AFC curve is a rectangular hyperbola curve.
c. When MR is falling but positive, TR will also be falling and positive.
State, with valid reasons, which of the following statements are true or false:
a. Average Revenue curve under the Perfect Competition is a downward sloping curve.
b. AFC curve is a rectangular hyperbola curve.
c. When MR is falling but positive, TR will also be falling and positive.
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Solution
(a) False : Since the firm under Perfect Competition is a price taker, AR curve will be a straight line parallel to X - axis.
(b) True : Since TFC remains unchanged/ constant.
(c) False : When MR is falling but positive, TR will be rising.
(brief explanation of each)
(a) False : Since the firm under Perfect Competition is a price taker, AR curve will be a straight line parallel to X - axis.
(b) True : Since TFC remains unchanged/ constant.
(c) False : When MR is falling but positive, TR will be rising.
(brief explanation of each)
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