Asked by Juleny Degollado on May 17, 2024
Verified
Under perfect competition,price is equal to
A) marginal revenue.
B) total revenue divided by output.
C) average revenue.
D) All of the choices are equal to price under perfect competition.
Perfect Competition
A market structure characterized by a large number of small firms, identical products sold by all firms, perfect information, and no barriers to entry or exit.
Marginal Revenue
The increased earnings realized from the sale of one extra good or service.
Average Revenue
The total revenue earned by a firm from selling its goods or services, divided by the quantity of goods or services sold, indicating the average income per product unit.
- Comprehend the connection between price and marginal revenue in the context of perfect competition.
Verified Answer
CT
Caitlin TomlinsonMay 19, 2024
Final Answer :
D
Explanation :
Under perfect competition, there are no barriers to entry or exit, homogeneous products, and numerous buyers and sellers. The presence of these conditions means that a firm is a price taker, meaning it cannot influence the price of the product. Therefore, the market sets the price. As a result, marginal revenue, total revenue divided by output, and average revenue are all equal to the market price under perfect competition.
Learning Objectives
- Comprehend the connection between price and marginal revenue in the context of perfect competition.