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JAMB Economics 2000 Question 21

Question 21

Market Structures

The short-run equilibrium in a perfectly competitive market requires that

  1. A.marginal cost be equal to total revenue
  2. B.marginal cost and marginal revenue be equal
  3. C.costs are mutually determined by buyers and sellers
  4. D.the marginal cost curve cuts the total cost curve.
Show the answer and explanation

Answer: B (marginal cost and marginal revenue be equal)

Explanation

Every profit-maximizing firm, including a perfect competitor, is in equilibrium where MC = MR.