Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:
Firm 1 will not produce anything if the market price is less than p1 while firm 2 will not produce anything if the market price is less than p2. For a market price greater than or equal to p1 but strictly less than p2, the market supply curve (Assume also that p2 is greater than p1)
Options:
is the difference of supply curve of firm 1 and firm 2
coincides with the supply curve of firm 2
coincides with the supply curve of firm 1
none of above
Correct Answer:
coincides with the supply curve of firm 1
Explanation:
For a market price greater than or equal to p1 but strictly less than p2 , only firm 1 will produce a positive amount of the good. Therefore, in this range, the market supply curve coincides with the supply curve of firm 1.