Asked by Ramond Foster on Jul 05, 2024
Verified
In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is
A) equal to the price.
B) less than the price.
C) greater than the price.
D) equal to the average cost.
Marginal Revenue
The enhanced earnings from selling an additional unit of a product or service.
Pure Competition
A market structure characterized by a large number of firms, all producing identical products, and no single firm has any influence over market price.
Extra Unit
The additional quantity of a product or service that is produced or provided.
- Appraise the role that marginal revenue plays in setting prices in a purely competitive firm environment.
Verified Answer
JS
Jamie SpiersJul 05, 2024
Final Answer :
A
Explanation :
In pure competition, the price is determined by the market and each firm is a price taker, meaning they can sell as much as they want at the market price. Therefore, the marginal revenue, which is the additional revenue from selling one more unit, is equal to the price.
Learning Objectives
- Appraise the role that marginal revenue plays in setting prices in a purely competitive firm environment.