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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

Anchal was studying for her economic examination. She wanted to know about the TR curve in a perfect competition. She went to her elder sister to ask about it. Her elder sister said:
a. The TR curve passes through point O, that is, origin.
b. TR curve is an upward rising straight line.
c. The slope of the TR curve is Q, i.e. quantity.
Which of the statement made by her are correct?

Options:

a, b,c

a, b

a, c

b, c

Correct Answer:

a, b

Explanation:

The correct answer is option 2: a, b

Let's analyze each statement about the Total Revenue (TR) curve in perfect competition:

  • a. The TR curve passes through point O, that is, origin.
    • This is correct. When quantity (Q) is zero, total revenue (TR) is also zero (TR = Price * Q). Therefore, the TR curve starts at the origin.
  • b. TR curve is an upward rising straight line.
    • This is correct. In perfect competition, the price is constant. Therefore, TR increases at a constant rate as quantity increases, resulting in an upward-sloping straight line.
  • c. The slope of the TR curve is Q, i.e. quantity.
    • This is incorrect. The slope of the TR curve is the change in TR divided by the change in quantity. In perfect competition, this slope is equal to the price (P), which is constant. The slope is not quantity. Instead, the price is the slope.

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