Question

16. The short-run equilibrium in a perfectly competitive market is determined by the _____

a. intersection of the market demand and the largest firm's marginal cost curve.

b. intersection of the market demand and market supply curves.

c. intersection of the market supply curve and the most profitable firm's demand curve.

d. intersection of the market supply curve and the demand curve of the largest firm in a market.

e. intersection of the market demand and the largest firm's supply curve.

Answer 1

16. The answer is B

Short run equilibrium in the perfectly competitive market is determined by the intersection of market demand and market supply curves. Firms price will be determined by the intersection of MD and MS in the industry. Under perfectly competitive market, Features are large number of firms producing homogeneous products. freedom of entry and exit, profit maximisation etc. But in the long run they can earn only normal profit because of the entry and exit.