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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 5
Two students are preparing for their micro exam, but they seem confused:
Student A: ''We learned that demand curves always slope downward. In the case of a competitive firm, this downward sloping demand curve is also the firm s marginal revenue curve. So that is why marginal revenue is equal to price.
Student B: ''I think you have it wrong. The demand curve facing a competitive firm is horizontal. The marginal revenue curve is also horizontal, but it lies below the demand curve. So marginal revenue is less than price.
Can you clear up this drivel? Explain why neither student is likely to warrant a grade commensurate with his or her name.
Student A: ''We learned that demand curves always slope downward. In the case of a competitive firm, this downward sloping demand curve is also the firm s marginal revenue curve. So that is why marginal revenue is equal to price.
Student B: ''I think you have it wrong. The demand curve facing a competitive firm is horizontal. The marginal revenue curve is also horizontal, but it lies below the demand curve. So marginal revenue is less than price.
Can you clear up this drivel? Explain why neither student is likely to warrant a grade commensurate with his or her name.
Explanation
Verified
Verified
The statement by Student A is not right;...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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