A price-taking firm's marginal revenue is ______ the price of its output.

Question

A price-taking firm's marginal revenue is ­­­­______ the price of its output.

Quizplus · Accepted Answer

A price-taking firm is an individual firm in a perfectly competitive market. In a perfectly competitive market, each firm is a price-taker, meaning it faces a perfectly elastic demand curve, implying it can sell any quantity of output at the prevailing market price, but its decision of what quantity to produce will not influence the market price. Therefore, for a price-taking firm, marginal revenue, which is the additional revenue earned by producing one more unit of output, is equal to the price of its output. This is because the price-taking firm can merely sell the additional unit of output it produces to the existing market price, and thus the marginal revenue earned from selling one more unit of output is equal to the prevailing market price.

A Price-Taking Firm's Marginal Revenue Is ­­­­______ the Price of Its

A Price-Taking Firm's Marginal Revenue Is ______ the Price of Its