Asked by Regina Andres on Jul 25, 2024
Verified
Which of the following statements is correct?
A) For all firms, marginal revenue equals the price of the good.
B) Only for competitive firms does average revenue equal the price of the good.
C) Marginal revenue can be calculated as total revenue divided by the quantity sold.
D) Only for competitive firms does average revenue equal marginal revenue.
Marginal Revenue
The additional income received from selling one more unit of a good or service; this is crucial for businesses in determining how many units to produce.
Average Revenue
The total revenue generated by a firm divided by the quantity of goods or services sold, indicating the average amount of money made per unit.
Competitive Firms
Enterprises that operate in a market where they have to compete against other firms for the same customers or resources.
- Identify the differences between average income, border revenue, and their value to firms focusing on profit maximization.
Verified Answer
SH
Stephanie HarrisonJul 25, 2024
Final Answer :
D
Explanation :
For competitive firms, both average revenue (total revenue divided by quantity sold) and marginal revenue (the change in total revenue from selling one more unit) equal the price of the good. This is because competitive firms are price takers and cannot influence the market price.
Learning Objectives
- Identify the differences between average income, border revenue, and their value to firms focusing on profit maximization.