For a firm operating under perfect competition, which relationship normally holds for each unit of output?
Correct answer: C. Price equals marginal revenue
- A. Price is greater than marginal revenue
- B. Price is less than marginal revenue
- C. Price equals marginal revenue
- D. Price equals average fixed cost
Explanation
A perfectly competitive firm is a price taker, so selling one more unit adds the market price to revenue. Therefore, price, average revenue and marginal revenue are equal.
Last updated
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
38 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on this paper prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for it.
Related questions
A factory imposes pollution costs on nearby residents that are not included in its private production costs. At the efficient output, which condition is expected?
A firm has fixed cost of Rs. 100 and variable cost of Rs. 300 when it produces 20 units. What is its average total cost?
A firm in a perfectly competitive market faces a horizontal demand curve mainly because it:
A firm's economic profit is zero when its total revenue is equal to its:
A monopolist can successfully practise price discrimination only when it can: