When a firm is operating in a perfectly competitive market, which of the following best describes marginal revenue?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, each firm is a price taker, meaning it has to accept the market price to sell its goods. Therefore, the marginal revenue for a perfectly competitive firm is equal to the change in total revenue divided by the change in output, which is the same as the market price. Hence, choice B is the correct answer. Option A is not true since the marginal revenue can be positive or negative and is not necessarily zero in the long run. Option C is incorrect because it is a definition of price elasticity of demand, not marginal revenue. Option D is wrong because marginal revenue is equal to price in a perfectly competitive market.

When a Firm Is Operating in a Perfectly Competitive Market