Asked by David Adamovich on May 06, 2024
Verified
For an individual firm operating in a competitive market, marginal revenue equals
A) average revenue and the price for all levels of output.
B) average revenue, which is greater than the price for all levels of output.
C) average revenue, the price, and marginal cost for all levels of output.
D) marginal cost, which is greater than average revenue for all levels of output.
Average Revenue
The total revenue earned by a firm per unit of output sold.
Marginal Revenue
The increased earnings from the sale of one extra unit of a good or service.
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity controls the market price.
- Skill in evaluating the correlation between marginal revenue and total revenue.
Verified Answer
SE
Sydney EberthMay 09, 2024
Final Answer :
A
Explanation :
In a competitive market, the price of the product is determined by the market and is constant for each unit sold by the firm. Therefore, the marginal revenue (the revenue from selling one more unit) equals the price of the product, which also equals the average revenue (total revenue divided by the quantity sold). Choices B, C, and D introduce conditions that do not apply to firms in competitive markets.
Learning Objectives
- Skill in evaluating the correlation between marginal revenue and total revenue.