Which one of the following statements for a firm's equilibrium in Perfect Competition is not correct?

Correct option is D

The correct answer is (d) The marginal cost decreases at the equilibrium output.
Explanation:
In Perfect Competition, a firm’s equilibrium occurs when it maximizes profit or minimizes loss. The following conditions must be satisfied for equilibrium:
The market price must be greater or equal to average variable cost in the short run: This statement is correct. In the short run, a firm will continue to produce as long as the market price is greater than or equal to the average variable cost (AVC). If the price falls below the AVC, the firm will shut down as it cannot cover its variable costs.
The market price must be equal to marginal cost: This statement is correct. In perfect competition, firms set their output where the market price (P) is equal to the marginal cost (MC), ensuring that they are maximizing their profit or minimizing their loss. This is the point where the firm’s profit is optimized in both the short run and the long run.
The market price must be equal to average cost in the long run: This statement is correct. In the long run, in perfect competition, firms earn zero economic profit because the market price (P) equals the average cost (AC) at equilibrium. This ensures that firms cover all their costs, including normal profit, but do not make supernormal profits.
The marginal cost decreases at the equilibrium output: This statement is incorrect. In perfect competition, at the equilibrium point, the marginal cost (MC) is either constant or increasing. The equilibrium occurs at the point where the MC curve intersects the price level (which is also the demand curve in perfect competition). The MC curve typically has a U-shape, and equilibrium is reached where it is rising, not decreasing.
Information Booster:
● In Perfect Competition, firms are price takers, meaning they accept the market price as given.

● The equilibrium point ensures that firms maximize profit by setting P = MC.

● In the short run, firms will shut down if the price falls below the average variable cost (AVC).

● In the long run, firms earn zero economic profit as price equals average cost (AC), ensuring only normal profit is earned.