Firms have several different concepts of revenue: total revenue,average revenue,marginal revenue,and price.For a profit-maximizing perfectly competitive firm,which statement below is true?
A)Total revenue,average revenue,marginal revenue,and price are all equal.
B)Average revenue,marginal revenue,and price are equal.
C)Only marginal revenue and price are equal.
D)Only average revenue and price are equal.
E)None of these revenues are equal.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm is a price taker, meaning it cannot influence the market price. Therefore, the firm's marginal revenue is equal to the market price. The average revenue, which is the revenue per unit of output sold, is also equal to the price in a perfectly competitive market. However, the total revenue is not necessarily equal to any of these revenues because it depends on the quantity of output sold. Therefore, the correct answer is that the average revenue, marginal revenue, and price are equal, while the total revenue may be different.

Firms Have Several Different Concepts of Revenue: Total Revenue,average Revenue,marginal