In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm,
A)marginal revenue will graph as an upsloping line.
B)the demand curve will lie above the marginal revenue curve.
C)the marginal revenue curve will lie above the demand curve.
D)the demand and marginal revenue curves will coincide.

Question

Quizplus · Accepted Answer

In a purely competitive market, a firm is a price taker, meaning the price of its product is determined by the market. Therefore, the demand curve facing the firm is perfectly elastic, and the marginal revenue (the additional revenue from selling one more unit of output) is equal to the price at all levels of output. This results in the demand and marginal revenue curves coinciding, both being horizontal lines at the market price.

In Answering the Question, Assume a Graph in Which Dollars