Economics - Economics Section 1
31. Which of the following statements about perfect competition is most accurate?
- Option : B
- Explanation : In perfect competition, at equilibrium, price = marginal revenue = marginal cost.
32. In first-degree price discrimination, the consumer surplus:
- Option : C
- Explanation : In first degree price discrimination, the entire consumer surplus is captured by the producer. The consumer surplus falls to zero.
- Option : A
- Explanation : Under marginal cost pricing, a subsidy is provided to the monopolist if MC < ATC.
- Option : B
- Explanation : The Cournot model describes a special case of Nash equilibrium, in which no firm can increase profits by changing its price/output choice. Kinked demand curve: Price at the kink in demand function. Dominant firm: Price at the quantity where MR = MC. Followers take the leader’s price.
- Option : B
- Explanation : As prices decrease, smaller firms will leave the market rather than sell below cost. The most likely scenario is that Engro (market leader) will decrease prices and its market share will increase.
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