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The Theory of the Firm under Perfect Competition

NCERT Class 11 · Economics Based on NCERT Class 11 Economics textbook · Free CBSE study kit

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Chapter Notes

Overview
This chapter explores how a firm decides how much to produce in a perfectly competitive market, assuming the firm is a ruthless profit maximiser. It defines the features of perfect competition, derives the revenue concepts for a price-taking firm, and establishes the three conditions for profit maximisation. The key takeaway is that a firm's supply curve is derived from its marginal cost curve, and the market supply curve is the horizontal summation of individual firms' supply curves.
Key Concepts (18)
Perfect Competition
A market environment with a large number of buyers and sellers, homogenous products, free entry and exit, and perfect information.
e.g. The market for wheat in a village where many farmers sell identical wheat, and all buyers know the prevailing price.
Price-taking behaviour
A firm that believes it cannot influence the market price; if it sets a price above the market price, it sells nothing; if it sets a price at or below the market price, it can sell as much as it wants.
e.g. A small vegetable vendor in a large market must accept the market price for tomatoes; if she charges more, customers will buy from other vendors.
Total Revenue (TR)
The market price of the good multiplied by the firm's output: TR = p × q.
e.g. If a firm sells 10 boxes of candles at Rs 10 each, TR = Rs 100.
Average Revenue (AR)
Total revenue per unit of output; for a price-taking firm, AR equals the market price (p).
e.g. If TR is Rs 50 from selling 5 units, AR = Rs 10, which equals the market price.
Marginal Revenue (MR)
The increase in total revenue from selling one additional unit of output; for a price-taking firm, MR equals the market price (p).
e.g. If selling 2 units gives TR of Rs 20 and selling 3 units gives TR of Rs 30, MR = Rs 10.
Price Line
A horizontal straight line at the market price (p) on a graph with price on the y-axis and output on the x-axis; it represents the firm's AR curve and its perfectly elastic demand curve.
e.g. In a graph, a horizontal line at p = Rs 10 shows that the firm can sell any quantity at that price.
Profit (π)
The difference between total revenue (TR) and total cost (TC): π = TR – TC.
e.g. If TR is Rs 100 and TC is Rs 80, profit is Rs 20.
Profit Maximisation
The process by which a firm chooses the output level that yields the highest profit, subject to three conditions: p = MC, MC is non-decreasing, and p ≥ AVC (short run) or p ≥ AC (long run).
e.g. A firm producing candles will keep increasing output as long as the extra revenue (price) exceeds the extra cost (MC).
Supply Curve
A curve showing the levels of output a firm chooses to produce at different market prices, keeping technology and factor prices constant.
e.g. A table showing that at price Rs 10, the firm supplies 5 units; at price Rs 15, it supplies 8 units.
Short Run Supply Curve
The rising part of the SMC curve from and above the minimum AVC, plus zero output for all prices below minimum AVC.
e.g. If minimum AVC is Rs 8, the firm supplies zero at price Rs 7, and supplies along the SMC curve for price Rs 8 and above.
Long Run Supply Curve
The rising part of the LRMC curve from and above the minimum LRAC, plus zero output for all prices below minimum LRAC.
e.g. If minimum LRAC is Rs 12, the firm supplies zero at price Rs 11, and supplies along the LRMC curve for price Rs 12 and above.
Shut Down Point
The point on the supply curve where the firm stops producing; in the short run, it is the minimum of AVC; in the long run, it is the minimum of LRAC.
e.g. If the market price falls below the minimum AVC of Rs 8, the firm shuts down in the short run.
Normal Profit
The minimum level of profit needed to keep a firm in business; it is considered a part of total cost (opportunity cost of entrepreneurship).
e.g. If a firm could earn Rs 5,000 by managing another business, that Rs 5,000 is normal profit and part of its total cost.
Break-even Point
The point on the supply curve where a firm earns only normal profit; it occurs at the minimum of the average cost curve (SAC in short run, LRAC in long run).
e.g. At the minimum of the LRAC curve, the firm's price equals its average cost, so it earns zero super-normal profit.
Market Supply Curve
The horizontal summation of the supply curves of all individual firms in the market, showing total output supplied at each price.
e.g. If Firm A supplies 10 units and Firm B supplies 15 units at price Rs 10, market supply is 25 units.
Price Elasticity of Supply (eS)
The percentage change in quantity supplied divided by the percentage change in price: eS = (ΔQ/Q) / (ΔP/P).
e.g. If price rises by 10% and quantity supplied rises by 20%, eS = 2.
Opportunity Cost
The gain foregone from the second best activity when a choice is made.
e.g. If you invest Rs 1,000 in your family business instead of depositing it in a bank earning 10% interest, the opportunity cost is the Rs 100 interest foregone.
Unit Tax
A tax imposed by the government per unit sale of output, which shifts the firm's cost curves upward by the amount of the tax.
e.g. A Rs 2 per unit tax means if a firm sells 10 units, it pays Rs 20 in tax.
Formulas & Equations (6)
TR = p × q
Reads as: Total revenue equals price times quantity
Variables: p = market price (in Rs), q = quantity sold (in units)
Use when: Calculating total revenue from given price and output
⚠ Students forget that p is constant for a price-taking firm and treat it as variable.
AR = TR / q = p
Reads as: Average revenue equals total revenue divided by quantity, which equals price
Variables: TR = total revenue (Rs), q = quantity (units), p = market price (Rs)
Use when: Proving that AR equals market price for a perfectly competitive firm
⚠ Students think AR is different from price in perfect competition.
MR = (pq2 – pq1) / (q2 – q1) = p
Reads as: Marginal revenue equals the change in total revenue divided by the change in quantity, which equals price
Variables: pq2 = total revenue at new quantity (Rs), pq1 = total revenue at old quantity (Rs), q2 = new quantity (units), q1 = old quantity (units), p = market price (Rs)
Use when: Showing that MR equals market price for a price-taking firm
⚠ Students incorrectly calculate MR as change in TR without dividing by change in quantity.
π = TR – TC
Reads as: Profit equals total revenue minus total cost
Variables: π = profit (Rs), TR = total revenue (Rs), TC = total cost (Rs)
Use when: Calculating profit at any output level
⚠ Students forget to include implicit costs (normal profit) in TC.
eS = (ΔQ / Q) / (ΔP / P) = (ΔQ / ΔP) × (P / Q)
Reads as: Price elasticity of supply equals percentage change in quantity supplied divided by percentage change in price
Variables: ΔQ = change in quantity supplied (units), Q = original quantity (units), ΔP = change in price (Rs), P = original price (Rs)
Use when: Measuring responsiveness of quantity supplied to price changes
⚠ Students confuse elasticity with slope; elasticity changes along a straight line supply curve.
Sm(p) = S1(p) + S2(p) + ... + Sn(p)
Reads as: Market supply at price p equals the sum of individual firm supplies at that price
Variables: Sm(p) = market supply (units), S1(p) = supply of firm 1 (units), etc.
Use when: Deriving market supply curve from individual supply curves
⚠ Students add vertically instead of horizontally.
How It Works
Profit Maximisation (Short Run)
  1. Step 1: Identify the market price (p) which is constant for the firm.
  2. Step 2: Find the output level where p = SMC on the rising part of the SMC curve.
  3. Step 3: Check that at that output, SMC is non-decreasing (i.e., on the upward-sloping portion).
  4. Step 4: Verify that p ≥ AVC at that output level.
  5. Step 5: If all conditions hold, that output is the profit-maximising level; if p < minimum AVC, produce zero output.
💡 Students often forget to check the second condition (non-decreasing MC) and the third condition (p ≥ AVC).
Profit Maximisation (Long Run)
  1. Step 1: Identify the market price (p).
  2. Step 2: Find the output level where p = LRMC on the rising part of the LRMC curve.
  3. Step 3: Check that LRMC is non-decreasing at that output.
  4. Step 4: Verify that p ≥ LRAC at that output level.
  5. Step 5: If all conditions hold, that output is the profit-maximising level; if p < minimum LRAC, produce zero output.
💡 In the long run, the firm must cover all costs (LRAC), not just variable costs.
Derivation of Short Run Supply Curve
  1. Step 1: For prices greater than or equal to minimum AVC, equate p with SMC on the rising part to get the profit-maximising output.
  2. Step 2: For prices less than minimum AVC, the firm produces zero output.
  3. Step 3: The short run supply curve is the rising part of SMC from and above minimum AVC, plus zero output for all lower prices.
💡 The supply curve is NOT the entire SMC curve; only the portion above minimum AVC.
Derivation of Long Run Supply Curve
  1. Step 1: For prices greater than or equal to minimum LRAC, equate p with LRMC on the rising part to get the profit-maximising output.
  2. Step 2: For prices less than minimum LRAC, the firm produces zero output.
  3. Step 3: The long run supply curve is the rising part of LRMC from and above minimum LRAC, plus zero output for all lower prices.
💡 The shut down point in the long run is the minimum of LRAC, not AVC.
Derivation of Market Supply Curve
  1. Step 1: For a given market price, find the quantity supplied by each firm from their individual supply curves.
  2. Step 2: Sum the quantities supplied by all firms at that price.
  3. Step 3: Repeat for different prices to get the market supply schedule.
  4. Step 4: Plot the points to get the market supply curve (horizontal summation).
💡 Market supply is the horizontal sum, not vertical sum, of individual supply curves.
Effect of a Unit Tax on Supply
  1. Step 1: A unit tax of Rs t is imposed per unit of output.
  2. Step 2: The firm's LRAC and LRMC curves shift upward by exactly Rs t at every output level.
  3. Step 3: The new supply curve (S1) is the rising part of the new LRMC from and above the new minimum LRAC.
  4. Step 4: The supply curve shifts to the left: at any given market price, the firm supplies fewer units.
💡 The tax shifts both AC and MC curves upward by the same amount (t).
Exam Traps — Don't Make These Mistakes
⚠ Confusing AR and MR with Price
✗ AR and MR are different from market price in perfect competition.
→ For a price-taking firm, both AR and MR equal the market price (p). AR = TR/q = p, and MR = ΔTR/Δq = p.
✓ For a perfectly competitive firm, AR = MR = market price (p).
⚠ Using the Entire MC Curve as Supply Curve
✗ The supply curve of a firm is its entire marginal cost curve.
→ Only the rising part of the MC curve from and above the minimum AVC (short run) or minimum AC (long run) is the supply curve. The downward-sloping part and the portion below minimum AVC/AC are not part of the supply curve.
✓ The short run supply curve is the rising part of SMC from and above minimum AVC; the long run supply curve is the rising part of LRMC from and above minimum LRAC.
⚠ Ignoring the Shut Down Condition in Short Run
✗ A firm will always produce if price is above average fixed cost.
→ The relevant comparison is with average variable cost (AVC), not average fixed cost (AFC). In the short run, fixed costs are sunk; the firm continues if price covers AVC.
✓ In the short run, a firm produces positive output only if price ≥ minimum AVC; otherwise, it shuts down and produces zero.
⚠ Adding Supply Curves Vertically Instead of Horizontally
✗ The market supply curve is obtained by adding the supply curves of individual firms vertically.
→ Market supply is the sum of quantities supplied at each price, which is a horizontal summation (adding quantities on the x-axis), not vertical (adding prices on the y-axis).
✓ The market supply curve is the horizontal summation of individual firms' supply curves.
⚠ Confusing Normal Profit with Zero Profit
✗ Normal profit means the firm earns zero profit.
→ Normal profit is the minimum profit needed to keep the firm in business; it is included as part of total cost (opportunity cost). So when a firm earns normal profit, economic profit is zero, but accounting profit is positive.
✓ Normal profit is the opportunity cost of entrepreneurship; it is a part of total cost. A firm earning normal profit has zero economic profit but positive accounting profit.
⚠ Misapplying the Profit Maximisation Condition
✗ Profit is maximised when MR = MC, regardless of the shape of the MC curve.
→ The condition MR = MC is necessary but not sufficient. The MC curve must be non-decreasing (rising) at the profit-maximising output. If MC is falling, the firm can increase profit by producing more.
✓ For profit maximisation, three conditions must hold: (i) p = MC, (ii) MC is non-decreasing, and (iii) p ≥ AVC (short run) or p ≥ AC (long run).
Compare & Contrast
Basis of shut down point
Short Run Supply Curve
Long Run Supply Curve
In the short run, the shut down point is the minimum of AVC; in the long run, the shut down point is the minimum of LRAC.
Relationship with market price
Average Revenue (AR)
Marginal Revenue (MR)
Both AR and MR equal the market price (p) for a perfectly competitive firm, but AR is total revenue per unit (TR/q), while MR is the change in total revenue from selling one more unit (ΔTR/Δq).
Profit level relative to opportunity cost
Normal Profit
Super-normal Profit
Normal profit is the minimum profit to keep the firm in business (zero economic profit), while super-normal profit is profit above normal profit (positive economic profit).
Exam Focus
Marks pattern: Typically 2-3 MCQs (1 mark each), 1 short answer question (3 marks) on revenue or profit maximisation, and 1 long answer question (5-6 marks) on supply curve derivation or market supply.
Most asked: Features of perfect competition · Revenue concepts (TR, AR, MR) for a price-taking firm · Profit maximisation conditions (p = MC, MC non-decreasing, p ≥ AVC/AC) · Derivation of short run and long run supply curves · Market supply curve as horizontal summation · Price elasticity of supply
Don't skip: Derive the short run supply curve of a firm with the help of a diagram.; Explain the three conditions for profit maximisation under perfect competition.; How is the market supply curve derived from individual supply curves? Explain with a diagram and example.
One-Line Revision (read aloud before the exam)
  1. Perfect competition requires a large number of buyers and sellers, homogenous products, free entry and exit, and perfect information.
  2. A price-taking firm cannot influence the market price and can sell any quantity at the prevailing price.
  3. Total revenue (TR) = price × quantity (p × q).
  4. For a perfectly competitive firm, average revenue (AR) = marginal revenue (MR) = market price (p).
  5. The price line is a horizontal straight line at the market price, representing the firm's demand curve.
  6. Profit (π) = total revenue (TR) – total cost (TC).
  7. Profit maximisation requires p = MC, MC non-decreasing, and p ≥ AVC (short run) or p ≥ AC (long run).
  8. The short run supply curve is the rising part of SMC from and above minimum AVC.
  9. The long run supply curve is the rising part of LRMC from and above minimum LRAC.
  10. The shut down point is the minimum of AVC in the short run and the minimum of LRAC in the long run.
  11. Normal profit is the opportunity cost of entrepreneurship and is included in total cost.
  12. The break-even point is where the firm earns only normal profit (minimum of AC).
  13. The market supply curve is the horizontal summation of individual firms' supply curves.
  14. Price elasticity of supply (eS) = (ΔQ/Q) / (ΔP/P).
  15. A unit tax shifts the firm's cost curves upward and its supply curve to the left.
  16. Technological progress shifts the supply curve to the right (lower MC at each output).
  17. An increase in input prices shifts the supply curve to the left (higher MC at each output).

MCQs — 10 Questions with Answers

Q1. In perfect competition, a firm's average revenue curve is:

  • A. A horizontal straight line equal to the market price ✓
  • B. A downward-sloping line reflecting the demand curve
  • C. A vertical line at the profit-maximising quantity
  • D. A U-shaped curve like the average cost curve

Answer: A — In perfect competition, AR = p (market price), which is constant, so the AR curve is horizontal; it is also the firm's demand curve.

Q2. Which of the following is NOT a defining feature of perfect competition?

  • A. Large number of buyers and sellers
  • B. Firms can differentiate their products through branding ✓
  • C. Free entry and exit into the market
  • D. Perfect information about price and quality

Answer: B — Perfect competition requires homogeneous products with no differentiation; if firms could differentiate through branding, it would be monopolistic competition.

Q3. A firm in perfect competition maximises profit where:

  • A. MR = AC
  • B. MR = MC and MC is rising ✓
  • C. Price equals average cost
  • D. Total revenue minus total cost is zero

Answer: B — Profit is maximum where MR = MC with MC rising; comparing AR to AC determines the type of profit (supernormal, normal, or loss), not the output quantity.

Q4. The shut-down point for a firm occurs when:

  • A. Price falls below average cost
  • B. Price falls below average variable cost ✓
  • C. Marginal cost equals marginal revenue
  • D. The firm earns zero economic profit

Answer: B — The firm shuts down and exits when AR (price) < AVC; at this point it cannot cover variable costs, so leaving the market minimises losses.

Q5. In perfect competition, marginal revenue is:

  • A. Greater than price because demand is elastic
  • B. Equal to price because the demand curve is horizontal ✓
  • C. Less than price because of diminishing returns
  • D. Variable and depends on the quantity produced

Answer: B — MR = ΔTR/ΔQ = p in perfect competition; since price is constant (horizontal demand), selling one more unit adds exactly p to total revenue.

Q6. A firm earns supernormal profit in the short run when:

  • A. MR = MC
  • B. AR (price) is greater than average cost at the profit-maximising output ✓
  • C. The firm produces where MC is at its minimum
  • D. Total revenue exceeds total cost by any amount

Answer: B — Supernormal profit exists when AR > AC; MR = MC determines the quantity, but comparing AR to AC at that quantity determines whether profit is supernormal, normal, or a loss.

Q7. In long-run equilibrium under perfect competition, new firms stop entering the market because:

  • A. The market price reaches its maximum level
  • B. Average revenue equals long-run average cost, so only normal profit is available ✓
  • C. The government restricts entry to stabilise the economy
  • D. Marginal cost rises to equal average cost

Answer: B — Entry continues as long as supernormal profit exists (AR > LAC); when price falls to AR = LAC, only normal profit remains, so no incentive to enter.

Q8. The market price of a good in perfect competition is Rs 5 per unit. If a firm produces 100 units, its total revenue is:

  • A. Rs 500 ✓
  • B. Rs 400 (if AC = Rs 4)
  • C. Rs 600 (if MC = Rs 6)
  • D. Depends on the firm's average cost

Answer: A — TR = p × q = Rs 5 × 100 = Rs 500; total revenue depends only on price and quantity, not on costs or marginal cost.

Q9. A firm in perfect competition produces where MR = MC. At this output, AR = Rs 20 and AC = Rs 22. Which statement is correct? (A) The firm earns supernormal profit. (B) The firm incurs a loss of Rs 2 per unit. (C) The firm should shut down immediately. (D) The firm maximises profit if AR > AVC.

  • A. The firm earns supernormal profit
  • B. The firm incurs a loss of Rs 2 per unit
  • C. The firm should shut down immediately
  • D. The firm maximises profit if AR ≥ AVC and will continue production ✓

Answer: D — The firm is at the profit-maximising output (MR = MC), but earns a loss because AR < AC; it will continue only if AR ≥ AVC (covers variable costs); without knowing AVC, only statement D is safely correct.

Q10. Assertion: In perfect competition, a firm faces a perfectly elastic demand curve. Reason: The firm is a price-taker and can sell any quantity at the market price.

  • A. Both assertion and reason are true, and the reason is the correct explanation ✓
  • B. Both assertion and reason are true, but the reason is not the correct explanation
  • C. The assertion is true, but the reason is false
  • D. Both assertion and reason are false

Answer: A — Both are true: the firm faces a horizontal demand curve (perfectly elastic) because as a price-taker it can sell any quantity at market price without lowering price.

Flashcards

What are the four defining features of perfect competition?

Large number of buyers and sellers, homogeneous product, free entry and exit, and perfect information about the market.

Why does a price-taking firm always set price equal to market price, not below it?

Because it can sell all the output it wants at market price, so there is no reason to lower price and reduce revenue.

In perfect competition, what is the relationship between AR, MR, and Price?

All three are equal and constant: AR = MR = P (the horizontal demand curve).

State the condition for a firm to maximise profit in the short run.

The firm maximises profit where MR = MC and MC is rising (or at shut-down if loss is minimised there).

What is the shut-down point for a firm?

The firm shuts down and exits the market when average revenue (price) falls below average variable cost (AR < AVC).

How does a firm earn supernormal profit in perfect competition?

When average revenue (market price) exceeds average cost at the profit-maximising output level (AR > AC).

What happens in long-run equilibrium in perfect competition?

Only normal profit is earned because entry of new firms increases supply, lowers price until AR = LAC, and supernormal profit disappears.

Why does the firm face a horizontal demand curve in perfect competition?

Because the market price is fixed and the firm can sell any quantity at that price, so demand is perfectly elastic.

What is the difference between short-run and long-run equilibrium for a firm?

Short-run equilibrium can involve supernormal or normal profit, but long-run equilibrium involves only normal profit as entry/exit restores competition.

If MR = MC but AR < AC, is the firm in equilibrium and profitable?

No; the firm is at profit-maximising output but is incurring a loss; it continues only if AR ≥ AVC, otherwise it shuts down.

Important Board Questions

Define 'price-taking behaviour' in perfect competition with one example. [2 marks]

Explain that a firm cannot influence price and must accept market price; if it raises price above market, it loses all buyers; example: a wheat farmer cannot set price higher than the market wheat price and expect to sell. Keep within 2–3 sentences.

A firm in perfect competition has the following data: Market Price = Rs 10, Output = 50 units, Total Cost = Rs 450. Calculate (i) Total Revenue, (ii) Average Cost, (iii) Profit/Loss. State whether the firm earns supernormal profit, normal profit, or loss. [5 marks]

Apply formulas: TR = p × q, AC = TC/q, Profit = TR − TC. Then compare AR (= p) with AC to classify profit type. Show all working.

Explain with the help of a diagram why a firm in perfect competition earns only normal profit in long-run equilibrium but supernormal profit in the short run. Discuss the role of free entry and exit. [6 marks]

Draw short-run (MR = MC with AR > AC) and long-run (AR = LAC at minimum) equilibrium diagrams. Explain: supernormal profit → new firms enter → supply increases → price falls → AR = LAC → normal profit only. Emphasize free entry/exit mechanism and excess capacity in long-run.

Assertion-Reason Questions for The Theory of the Firm under Perfect Competition

Q1. Assertion (A):

A perfectly competitive firm is a price taker and cannot sell above the market price.

Reason (R):

Because all firms produce homogeneous products and buyers have perfect information about market price, so any firm charging above market price loses all customers to competitors.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both the assertion and reason are true, and the reason correctly explains why the assertion is true. The logic is: homogeneous products + perfect information = buyers will switch to competitors if one firm charges more = firm cannot charge above market price. This is the foundational concept of price-taking behaviour in perfect competition.

Q2. Assertion (A):

In a perfectly competitive market, Average Revenue (AR) always equals Marginal Revenue (MR).

Reason (R):

Because both AR and MR decline as output increases due to diminishing marginal utility.

Answer: C — A is true but R is false — The assertion is true — AR = MR = P in perfect competition. However, the reason is false. They are equal not because both decline, but because the market price is constant, making TR = p×Q (linear), so AR = p and MR = p. The reason incorrectly applies diminishing utility (a consumer concept) and incorrectly suggests AR and MR decline. The assertion is correct but the explanation is wrong.

Q3. Assertion (A):

Free entry and exit of firms in perfect competition leads to long-run normal profit only.

Reason (R):

Because entry of new firms when supernormal profits exist increases market supply, reduces price, and eliminates excess profits until AR = AC.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both assertion and reason are true, and the reason correctly explains the assertion. The mechanism is: supernormal profit → entry → supply increases → price falls → profit reduces to normal level (where AR = AC = P). This is the core explanation for why long-run equilibrium in perfect competition shows only normal profit.

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Case-Based Questions (CBQ) for The Theory of the Firm under Perfect Competition

Case Study:

Laxmi Textiles operates in the highly competitive cotton cloth market in India where hundreds of small weavers compete. The market price for standard cotton cloth is Rs 200 per metre. Laxmi can sell any quantity at this price without needing to reduce price. If Laxmi raises its price to Rs 210 per metre, it sells nothing because buyers immediately purchase from other identical suppliers at Rs 200. Laxmi's cost of production per metre is: Fixed Cost = Rs 2,000 per day, Variable Cost = Rs 120 per metre. Currently, Laxmi produces 50 metres per day.

Q1. What is Laxmi Textiles' total revenue at current output of 50 metres?

  • A. Rs 10,000 ✓
  • B. Rs 6,000
  • C. Rs 2,000
  • D. Rs 12,000

Answer: A

Q2. Calculate Laxmi's average variable cost (AVC) at the current output level.

  • A. Rs 40 per metre
  • B. Rs 80 per metre
  • C. Rs 120 per metre ✓
  • D. Rs 200 per metre

Answer: C

Q3. What is Laxmi's total profit or loss at 50 metres of output per day?

  • A. Loss of Rs 2,000 ✓
  • B. Profit of Rs 2,000
  • C. Loss of Rs 4,000
  • D. Profit of Rs 4,000

Answer: A

Q4. Which characteristic of perfect competition does Laxmi's inability to raise price above Rs 200 best illustrate?

  • A. Economies of scale in production
  • B. Free entry and exit for all firms
  • C. Government price regulation
  • D. Homogeneous products and perfect market information ✓

Answer: D

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