Question

• Which of the following is not a characteristic of perfect competition in the short run? A. All firms produce where average costs are minimised.
•  B. All buyers and sellers have perfect knowledge of market conditions.
•  C. All firms are price takers.
•  D. The equilibrium level of output occurs where marginal cost equals marginal revenue.

Answer 1

D. The equilibrium level of output occurs where marginal cost equals marginal revenue.

This tends to be a profit-maximizing option for perfectly competitive firm which happens at an output level in which marginal cost is equal to the marginal revenue.