For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

Question

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?​

Quizplus · Accepted Answer

In a perfectly competitive market, each firm is a price taker, which means that it has no influence on the market price. Therefore, the market price (P) is equal to both the average revenue (AR) and the marginal revenue (MR) for a perfectly competitive firm. This is because the firm cannot sell its output for a higher price than the market price, and any additional unit of output sold increases both total revenue and marginal revenue by the same amount (since the market price does not change). Therefore, choice A is the correct answer.

For Perfectly Competitive Firms, Which of the Following Correctly Shows