This Question: 1 pt The increase in total revenue that results from selling one more unit of output is O A. marginal cost. OB. marginal revenue. O c. average revenue. OD. None of the above. What is the relationship between price, average revenue, and marginal revenue for a firm in a perfectly competitive market? O A. Price is equal to both average revenue and marginal revenue. O B. Price is greater than average revenue and equal to marginal revenue. OC. Price is equal to average revenue and greater than marginal revenue. O D. Price, average revenue, and marginal revenue usually all have different values. Click to select your answer.
This Question: 1 pt The increase in total revenue that results from selling one more unit of output is O A. marginal cost. OB. marginal revenue. O c. average revenue. OD. None of the above. What is the relationship between price, average revenue, and marginal revenue for a firm in a perfectly competitive market? O A. Price is equal to both average revenue and marginal revenue. O B. Price is greater than average revenue and equal to marginal revenue. OC. Price is equal to average revenue and greater than marginal revenue. O D. Price, average revenue, and marginal revenue usually all have different values. Click to select your answer.
Answer
The answer is marginal
revenue. Marginal revenue is considered as the
additional income which is made to the total revenue which results
from a one-unit increase in the quantity sold. It is calculated by
dividing the change in the total revenue by the change in the
quantity. Therefore, the increase in total revenue that results
from selling one more unit of output is called as marginal
revenue.
The answer is price is equal to both average revenue and
marginal revenue. A firm is a price-taker under the
perfectly competitive market and the demand curve of the firm is
infinitely elastic. At the given price, the firm sells more
quantity of goods and this results in the increase of total revenue
but the increase rate in the total revenue will remain constant.
So, forthe perfectly competitive firm, it is MR=P=AR. The
relationship between price, average revenue and marginal revenue
for a firm in a perfectly competitive market is the price is equal
to both average revenue and marginal revenue.
