The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-In a perfectly competitive industry, the price of good A is $2. If a firm in this industry decides to increase its price to $2.50, it will:
A)realize an increase in profit of $0.50 per unit output.
B)be able to increase the quantity sold of good A.
C)be unable to sell any quantity of good A that is produced.
D)lose some of its customers in the market.
E)experience a decrease in profit of $0.50 per unit output.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-In a perfectly competitive industry, the price of good A is $2. If a firm in this industry decides to increase its price to $2.50, it will:
A)realize an increase in profit of $0.50 per unit output. 
B)be able to increase the quantity sold of good A. 
C)be unable to sell any quantity of good A that is produced. 
D)lose some of its customers in the market. 
E)experience a decrease in profit of $0.50 per unit output.

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers, meaning they must accept the market price. If a firm raises its price above the market price, consumers will buy from other firms offering the product at the market price, leading to the firm not being able to sell any of its products.

The Figure Given Below Shows the Revenue and Cost Curves