Question

In perfect competition:

1 - price and average variable cost are the same.
2 - price and marginal revenue are the same.
3 - price and total revenue are the same.
4 - total revenue and total variable cost are the same.
A) 1 and 2
B) 2 and 3
C) 3 and 4
D) 1 and 4

Answer 1

In perfect competition, the only accurate statement provided is that price and marginal revenue are the same; other comparisons like price to average variable cost, price to total revenue, and total revenue to total variable cost are not correct.

Step-by-step explanation:

In perfect competition, the correct statements are that (1) price and average variable cost are not necessarily the same, and (2) price and marginal revenue are indeed the same for a perfectly competitive firm. Hence, only the second statement is true in this context. Now considering the other options, (3) price and total revenue are not the same as total revenue is the price multiplied by the quantity produced, and (4) total revenue and total variable cost are not the same as total revenue is the total income from sales while total variable cost is the cost of varying inputs given the output level.

Therefore, the correct answer to the question should be A) 1 and 2, where 2 is the only accurate statement given the characteristics of a perfectly competitive market where price equals marginal revenue (P = MR), and firms are price takers - meaning they must accept the market price.