If an individual seller in a purely competitive market gets $4.00 for the first unit of its product sold, the seller's demand and marginal revenue curves will both be:
A) horizontal lines at $4.00.
B) downward-sloping lines with the highest price at $4.00.
C) horizontal lines, but the demand curve will be at $4.00 and the marginal revenue curve will be below $4.00.
D) none of the above.

Question

Quizplus · Accepted Answer

In a purely competitive market, individual sellers are price takers, meaning they have no control over the market price. Therefore, the demand and marginal revenue curves for an individual seller are horizontal lines at the market price, which in this case is $4.00. This reflects the fact that the seller can sell any quantity of the product at the market price, but cannot influence the price by changing the quantity sold.

If an Individual Seller in a Purely Competitive Market Gets