State with valid reasons, which of the following statement are true or

1.	State with valid reasons, which of the following statement 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.
Answer» (a) False. Under the perfect competition, a firm is a price-taker and has to accept the price determined by the industry. As a result, price remains constant irrespective of quantity of goods sold by the firm. Hence, average revenue curve is a straight line parallel to x-axis. (b) True. Total fixed cost remains constant and does not increase in output. AFC = \(\frac{Total\,Fixed\,Coast}{Units\,of\,Output}\) As more and more units are produced, AFC continues to decline. AFC curve is a rectangular hyperbola curve. It is so because if we multiply any value of output with corresponding AFC, we always get a constant total fixed cost. (c) False. When MR is falling but positive, TR will be rising and positive. Total revenue increases so long as marginal revenue is positive whether falling or increasing.

State with valid reasons, which of the following statement 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.

Answer»

(a) False. Under the perfect competition, a firm is a price-taker and has to accept the price determined by the industry. As a result, price remains constant irrespective of quantity of goods sold by the firm. Hence, average revenue curve is a straight line parallel to x-axis.

(b) True. Total fixed cost remains constant and does not increase in output.

AFC = \(\frac{Total\,Fixed\,Coast}{Units\,of\,Output}\)

As more and more units are produced, AFC continues to decline. AFC curve is a rectangular hyperbola curve. It is so because if we multiply any value of output with corresponding AFC, we always get a constant total fixed cost.

(c) False. When MR is falling but positive, TR will be rising and positive. Total revenue increases so long as marginal revenue is positive whether falling or increasing.

State with valid reasons, which of the following statement 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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