In Pure Competition

question 6

Multiple Choice

In pure competition:

• A) the optimal price-output solution occurs at the point where marginal revenue is equal to price
• B) a firm's demand curve is represented by a horizontal line
• C) a firm is a price-taker since the products of every producer are perfect substitutes for the products of every other producer
• D) a and b only
• E) a,b,and c

---

Definitions:

Market

A venue or mechanism where buyers and sellers come together to exchange goods, services, or information.

Price

The amount of money required to purchase a good or service, determined by factors such as demand, supply, and production costs.

Producer Surplus

The difference between the amount that producers are willing and able to supply a good for and the amount they actually receive (selling price).

Equilibrium

A state in which market supply and demand are balanced, and as a result, prices become stable.