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JAMB Economics 1982 Question 41

Question 41

Market Structures

Full equilibrium under perfect competition requires that

  1. A.MC = MR and AC = AR
  2. B.MC = MR but AR > AC
  3. C.MR = MC = AR = AC
  4. D.TR > TC
  5. E.MR = MC.
Show the answer and explanation

Answer: C (MR = MC = AR = AC)

Explanation

In long-run (full) equilibrium a perfectly competitive firm produces where MC = MR, and since it earns only normal profit, price (AR = MR) also equals AC.