CA Foundation Exam > CA Foundation Questions > Which of the following statements is correct?...
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Which of the following statements is correct?
- a)Monopolist can earn only profits
- b)Firms in a perfectly competitive market are price maker
- c)Industry in a perfectly competitive market is a price taker
- d)AR curve and demand curve are same
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which of the following statements is correct?a)Monopolist can earn onl...
I think, in this question
The answer would be "c" because of the firm is a price taker who is lie in the perfect competition market.
The answer would be "c" because of the firm is a price taker who is lie in the perfect competition market.
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Which of the following statements is correct?a)Monopolist can earn onl...
Statement: AR curve and demand curve are same.
Explanation:
AR (Average Revenue) curve and demand curve are two different concepts in economics. However, in a perfectly competitive market, the AR curve and demand curve are the same.
Here's why:
- In a perfectly competitive market, there are numerous buyers and sellers.
- Each seller sells an identical product and has no control over the market price.
- Therefore, the market demand curve is perfectly elastic, i.e., horizontal at the market price.
- Since the demand curve is horizontal, the AR curve, which represents the revenue earned per unit of output sold, is also horizontal at the market price.
- Hence, in a perfectly competitive market, the AR curve and demand curve are the same.
In other market structures such as monopoly, oligopoly, or monopolistic competition, the AR curve and demand curve are not the same. The demand curve is downward sloping, reflecting the fact that the monopolist or oligopolist has some control over the market price and must lower the price to sell more units. As a result, the AR curve is also downward sloping.
Conclusion:
Therefore, option 'D' is the correct answer as in a perfectly competitive market, the AR curve and demand curve are the same.
Explanation:
AR (Average Revenue) curve and demand curve are two different concepts in economics. However, in a perfectly competitive market, the AR curve and demand curve are the same.
Here's why:
- In a perfectly competitive market, there are numerous buyers and sellers.
- Each seller sells an identical product and has no control over the market price.
- Therefore, the market demand curve is perfectly elastic, i.e., horizontal at the market price.
- Since the demand curve is horizontal, the AR curve, which represents the revenue earned per unit of output sold, is also horizontal at the market price.
- Hence, in a perfectly competitive market, the AR curve and demand curve are the same.
In other market structures such as monopoly, oligopoly, or monopolistic competition, the AR curve and demand curve are not the same. The demand curve is downward sloping, reflecting the fact that the monopolist or oligopolist has some control over the market price and must lower the price to sell more units. As a result, the AR curve is also downward sloping.
Conclusion:
Therefore, option 'D' is the correct answer as in a perfectly competitive market, the AR curve and demand curve are the same.
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Which of the following statements is correct?a)Monopolist can earn only profitsb)Firms in a perfectly competitive market are price makerc)Industry in a perfectly competitive market is a price takerd)AR curve and demand curve are sameCorrect answer is option 'D'. Can you explain this answer?
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