Use the following to answer questions :
Figure: Costs and Profits for Tomato Producers
-(Figure: Costs and Profits for Tomato Producers)Use Figure: Costs and Profits for Tomato Producers.The market for tomatoes is perfectly competitive.The market price of a kilogram of tomatoes is $18.If the market price falls to $16,the farmer's marginal revenue _____ and the profit-maximizing output _____.

Question

Use the following to answer questions :
Figure: Costs and Profits for Tomato Producers 
-(Figure: Costs and Profits for Tomato Producers)Use Figure: Costs and Profits for Tomato Producers.The market for tomatoes is perfectly competitive.The market price of a kilogram of tomatoes is $18.If the market price falls to $16,the farmer's marginal revenue _____ and the profit-maximizing output _____.

Quizplus · Accepted Answer

When the market price falls to $16, the marginal revenue also decreases because the firm must lower its price to sell more tomatoes. In a perfectly competitive market, the profit-maximizing output is where Marginal Cost (MC) equals Marginal Revenue (MR). Since MR has decreased, the profit-maximizing output also decreases. Therefore, the correct answer is D) decreases;decreases.

Use the Following to Answer Questions