The following figure shows the market demand curve for penicillin, an antibiotic medicine. Initially, the market was supplied by perfectly competitive firms. Later, the government granted the exclusive right to produce and sell penicillin to one firm. The figure also shows the marginal revenue curve (MR) of the firm once it begins to operate as a monopoly. The marginal cost is constant at $3, irrespective of the market structure.

-Refer to the figure above.What is the price that a perfectly competitive firm would charge?

Question

The following figure shows the market demand curve for penicillin, an antibiotic medicine. Initially, the market was supplied by perfectly competitive firms. Later, the government granted the exclusive right to produce and sell penicillin to one firm. The figure also shows the marginal revenue curve (MR) of the firm once it begins to operate as a monopoly. The marginal cost is constant at $3, irrespective of the market structure.
 
-Refer to the figure above.What is the price that a perfectly competitive firm would charge?

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers, meaning they have no control over the price of their product. The price is determined by the interaction of supply and demand in the market. In this case, the market price is $3, so the firm would charge $3.

The Following Figure Shows the Market Demand Curve for Penicillin