Q.Perfect competition assumes ______.

A firm is in equilibrium (maximum profit) where MC = MR, so the answer is option (b).

A firm reaches equilibrium at the output level where its profit is maximised. This requires two conditions:

1. Marginal Cost = Marginal Revenue (MC = MR) — the necessary condition.
2. MC cuts MR from below (MC is rising and its slope is greater than that of MR) — the sufficient condition. …

Price and quantity supplied move in the same direction, so the relationship is positive (direct).

The law of supply states that, other things remaining constant, the quantity supplied of a commodity rises as its price rises and falls as its price falls. A higher price makes production and sale more profitable, encouraging firms to supply more; a lower price does the reverse. Because both variables move together, the supply curve slopes upward from left to right and the price–supply rel …

A firm's equilibrium (profit-maximising) condition is MC = MR.

A firm keeps expanding output as long as each extra unit adds more to revenue than to cost (MR > MC), and it will not produce a unit that costs more than it earns (MC > MR). Profit is therefore maximised at the output where the two are equal, MC = MR (with MC rising, i.e. cutting MR from below). This is the first-order condition of firm equilibrium under al …

Perfect competition assumes (a) homogeneous goods.

Perfect competition is a market with a very large number of buyers and sellers where firms have no control over price. A key assumption is that all firms produce a homogeneous (identical) product, so the goods of one seller are perfect substitutes for those of another. Because buyers cannot distinguish between sellers' products, a single uniform price prevails throughout the market and each firm is a price-taker.

Why the others are wrong:

• (d) Differentiated goods are a feature of monopolistic competition, not perfect competition. …