Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

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Quizplus · Accepted Answer

The average revenue per unit is calculated by dividing the total revenue by the number of units sold. In a competitive market, the price per unit (and thus the average revenue per unit) remains constant regardless of the quantity sold. Since the firm initially earns $1,800 from 150 units, the average revenue per unit is $12 ($1,800 / 150 units). Therefore, the average revenue of the 200th unit will also be $12, as the price per unit does not change with the quantity sold in a competitive market.

Suppose a Firm in a Competitive Market Produces and Sells