The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.1

-Suppose that in a perfectly competitive market, the market supply of a good increases. As a result, the individual firm's:

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.1
 
-Suppose that in a perfectly competitive market, the market supply of a good increases. As a result, the individual firm's:

Quizplus · Accepted Answer

In a perfectly competitive market, an increase in market supply leads to a decrease in the market price. Since the price is equal to the marginal revenue for a firm in perfect competition, a decrease in price means the marginal-revenue curve shifts downward. This typically results in the firm decreasing output to maximize profit, as it now earns less per additional unit sold.

The Figure Given Below Shows the Revenue and Cost Curves