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 In perfect Competition when the firm is a price taker, which curve among the following will be a straight line?
  • a)
    Marginal Cost
  • b)
    Average Cost
  • c)
    Total Cost
  • d)
    Marginal Revenue 
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
In perfect Competition when the firm is a price taker, which curve amo...
Explanation:

In perfect competition, a firm is considered a price taker, which means it has no control over the price of its product. The firm takes the market price as given and adjusts its quantity of production accordingly.

Marginal Revenue:
Marginal revenue (MR) is the additional revenue generated by selling one more unit of output. In perfect competition, the firm's marginal revenue is equal to the market price because it can sell any quantity at the market price. Therefore, the marginal revenue curve for a price-taking firm is a horizontal line at the market price.

Marginal Cost:
Marginal cost (MC) is the additional cost incurred by producing one more unit of output. The marginal cost curve reflects the change in total cost as output increases. In perfect competition, the marginal cost curve is typically upward sloping due to the law of diminishing returns. As the firm produces more output, it experiences diminishing marginal productivity, which leads to higher marginal costs.

Average Cost:
Average cost (AC) is the total cost per unit of output. It is calculated by dividing total cost by the quantity of output. The average cost curve shows the relationship between average cost and the quantity of output. In perfect competition, the average cost curve is U-shaped due to economies of scale and diseconomies of scale. At lower levels of output, average costs are high due to spreading fixed costs over fewer units. As output increases, average costs decrease due to economies of scale. However, at higher levels of output, average costs start to increase again due to diminishing returns and diseconomies of scale.

Total Cost:
Total cost (TC) is the sum of fixed costs (FC) and variable costs (VC). The total cost curve represents the relationship between total cost and the quantity of output. In perfect competition, the total cost curve is upward sloping due to the increasing variable costs as output increases.

Conclusion:
Among the given options, the marginal revenue curve (D) will be a straight line in perfect competition when the firm is a price taker. This is because the firm can sell any quantity at the market price, and hence, its marginal revenue is constant and equal to the market price. The other curves, such as marginal cost, average cost, and total cost, will have different shapes and slopes due to various factors influencing costs and production in the long run.
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In perfect Competition when the firm is a price taker, which curve among the following will be a straight line?a)Marginal Costb)Average Costc)Total Costd)Marginal RevenueCorrect answer is option 'D'. Can you explain this answer?
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