Question

Under perfect competition, the demand curve facing a firm and the firm's marginal revenue curve are...

Under perfect competition, the demand curve facing a firm and the firm's marginal revenue curve are

a.

vertical at the firm's chosen output level

b.

both vertical, but the demand curve is further to the right than the marginal revenue curve

c.

both vertical, but the marginal revenue curve is further to the right than the demand curve

d.

both horizontal, but the demand curve is above the marginal revenue curve

e.

both horizontal at the level of the market price

Homework Answers

Answer #1

answer is: e. both horizontal at the level of market price

Since the firm under perfect competition is a price taker, it can sell any amount of output at the same per unit price(average revenue or AR). This also means revenue obtained from sale of each additional unit(marginal revenue or MR) will be same as AR i.e., MR=AR. Demand curve faced by such a firm will be perfectly elastic i.e., horizontal and parallel to the x axis and same as MR and AR or market price level.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Which of the following is not an assumption of perfect competition? a. Full information b....
1. Which of the following is not an assumption of perfect competition? a. Full information b. Firms are price makers c. Free entry and exit d. Homogeneous products e. Large number of buyers and sellers . 2. The demand curve of a firm in perfect competition is a. Vertical b. Upward slopping c. Horizontal d. Downward slopping . 3. Marginal revenue curve of a perfectly competitive firm is   a. Not Possible b. Same as the demand curve c. The slope...
Under perfect competition, the marginal revenue is ____________________ while under monopolistic competition it is _____________________. a)downward...
Under perfect competition, the marginal revenue is ____________________ while under monopolistic competition it is _____________________. a)downward sloping, also downward sloping. b)horizontal, also horizontal c)downward sloping, horizontal d)horizontal, downward sloping
1) In monopolistic competition: A. when some firms exit, the demand curve for the firms that...
1) In monopolistic competition: A. when some firms exit, the demand curve for the firms that remain in the industry shifts to the left. B. firms may advertise to increase demand for their product. C. firms earn large economic profits in the long run. D. entry of new firms shifts the demand curve for existing firms to the right. 2) Monopolistic competition describes an industry characterized by: A. barriers to entry and exit. B. a small number of firms. C....
Suppose a firm is the sole employer in town, facing a labor supply curve w(L) =...
Suppose a firm is the sole employer in town, facing a labor supply curve w(L) = 2L. This monopsony is a price taker in the output market and has demand for labor DL= 200 –L (this is the marginal revenue product of labor). Calculate the total L demanded, producer surplus, consumer surplus, and DWL for this monopsony and compare these results to perfect competition.
3. Which of the following statements is false? a. The theory of perfect competition is completely...
3. Which of the following statements is false? a. The theory of perfect competition is completely and accurately descriptive of most real-world firms. b. In perfect competition, the market price is established at the intersection of the market demand and market supply curves. c. The perfectly competitive firm's demand curve is horizontal at the market price. d. If Firm X does not strictly meet all the assumptions of the theory of perfect competition, but behaves as if it does, then...
Assume a firm is operating under perfect competition and after profit maximizing, it finds that its...
Assume a firm is operating under perfect competition and after profit maximizing, it finds that its Price is P=200 and its average total costs are 180. Is this firm making a profit or a loss and how do you know (explain). Further, will that level of profit or loss continue for this firm for a long time – why or why not? Explain.    •   Assume that after profit maximizing, a monopolist finds that its price is 100, its output...
Draw a perfect competition graph include: a. Demand Curve . b. Supply Curve . c. Identify...
Draw a perfect competition graph include: a. Demand Curve . b. Supply Curve . c. Identify where marginal revenue and marginal cost intersect . d. Identify the profit maximizing quantity.
Under which market structure is a firm's MR curve horizontal? Select one: A. Monopoly B. Monopolistic...
Under which market structure is a firm's MR curve horizontal? Select one: A. Monopoly B. Monopolistic Competition C. Oligopoly D. Perfect Competition
Indicate the market structure, either perfect competition (P) or monopoly (M), suggested by the characteristic in...
Indicate the market structure, either perfect competition (P) or monopoly (M), suggested by the characteristic in the following statement. The firm finds that its demand is different from the market demand. Indicate the market structure, either perfect competition (P) or monopoly (M), suggested by the characteristic in the following statement. The selling price of the product increases and the firm adjusts its output by moving upward along its supply curve. Indicate the market structure, either perfect competition (P) or monopoly...
1Suppose the firm is a monopolist. It faces a downward-sloping demand curve, P(Q). If it also...
1Suppose the firm is a monopolist. It faces a downward-sloping demand curve, P(Q). If it also has non-negative marginal cost, will it choose a quantity on the demand curve where the price elasticity of demand is less than, greater than, or equal to -1? Explain. 2. Now, consider what will happen if a firm has exactly one competitor in the market. Both firms have identical technologies and cost structures (assuming a constant marginal cost may be helpful), and each chooses...