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Home Questions 24286FR4ZE
Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

Assertion: The Price Line is a horizontal straight line that cuts the x-axis at a height equal to p. 

Reasoning: The Price Line is the firm’s AR curve under perfect competition.

Options:

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is not true but Reasoning (R) is correct.

Correct Answer:

Assertion (A) is not true but Reasoning (R) is correct.

Explanation:

The correct answer is Option 4: Assertion (A) is not true but Reasoning (R) is correct.

Assertion: The Price Line is a horizontal straight line that cuts the x-axis at a height equal to p. This is false. The Price Line is a horizontal straight line that cuts the y-axis (and not x-axis) at a height equal to p.

Reasoning: The Price Line is the firm’s AR curve under perfect competition. This is true.

  • Average Revenue (AR) = Total Revenue (TR) ÷ Quantity (Q) = P × Q ÷ Q = P.
  • Since AR = Price, the AR curve is a horizontal line at p, which coincides with the price line.

 

 

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