Figure 10-3

-In perfect competition, marginal revenue always equals

Question

Figure 10-3
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-In perfect competition, marginal revenue always equals

Quizplus · Accepted Answer

In perfect competition, there are many buyers and sellers in the market, and the product is homogenous, which means that all firms sell the same product at the same price. Therefore, the demand curve of each firm is perfectly elastic, which means that they can sell as much as they want at the market price, but if they try to charge a higher price, they will lose all their customers. Thus, the marginal revenue of a firm in perfect competition is equal to the price of the product, because they can sell an additional unit of output at the same price as the previous units. Therefore, the correct answer is B, price.

Figure 10-3 ​

Figure 10-3