In a perfectly competitive market, the price that the firm faces from supply and demand is...
In a perfectly competitive market, the price that the firm faces from supply and demand is also equal to:
a. average variable cost.
b. marginal revenue and average revenue.
c. average revenue but never marginal revenue.
d. long run average cost in the short run.
Homework Answers
Ans: marginal revenue and average revenue.
Explanation:
In a perfectly competitive market, the price is determined by the intersection of market demand and supply curve. All the firms are the price takers. It means the firms will sell their goods at the determined by the industry. They do not have power to charge different price. They can sell as many quantities as they want at the existing market price. Therefore, the demand curve the firm faces is a horizontal curve parallal to X-axis. So, the MR and AR is equal to Price.
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