Asked by Sydney Mankin on May 12, 2024
Verified
The perfectly competitive firm's marginal revenue curve is:
A) exactly the same as the marginal cost curve.
B) downward-sloping, at twice the (negative) slope of the market demand curve.
C) vertical.
D) horizontal.
E) upward-sloping.
Marginal Revenue Curve
A graph that displays how marginal revenue varies as output changes.
Perfectly Competitive
A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price-taking behavior.
- Gain insight into the operation of enterprises in perfectly competitive environments, specifically regarding the setting of prices and production quantities.
- Comprehend the significance of demand curves in determining the price and output levels for firms operating under perfect competition.
Verified Answer
SK
Samantha KlingMay 19, 2024
Final Answer :
D
Explanation :
In perfect competition, the firm is a price taker and can sell as much output as it wants at the market price. Therefore, the firm's marginal revenue curve is horizontal, because any additional unit sold will bring in the same amount of revenue.
Learning Objectives
- Gain insight into the operation of enterprises in perfectly competitive environments, specifically regarding the setting of prices and production quantities.
- Comprehend the significance of demand curves in determining the price and output levels for firms operating under perfect competition.