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.
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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.
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