It Is Usually Assumed That a Perfectly Competitive Firm's Supply

question 2

Multiple Choice

It is usually assumed that a perfectly competitive firm's supply curve is given by its marginal cost curve.In order for this to be true,which of the following additional assumptions are necessary?
I.That the firm seek to maximize profits.
II.That the marginal cost curve be positively sloped.
III.That price exceeds average variable cost.
IV.That price exceeds average total cost.

• A) I and II only.
• B) I and II but not III and IV.
• C) I and III but not II and IV.
• D) I, II and III, but not IV.

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Definitions:

Identical Units

Units of product that are the same in every aspect, often used in inventory management and costing methods.

Inventory Costing Method

A system used to value inventory, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO), impacting the calculation of cost of goods sold and ending inventory.

LIFO

Last In, First Out; an inventory valuation method where the last items placed in inventory are the first ones to be used or sold.

Ending Inventory

The total value of a business’s merchandise, raw materials, and products not yet sold at the end of an accounting period.