Question

In a perfectly competitive market, a firm’s
A) Average Revenue is always equal to Marginal Revenue B) Marginal Revenue is more than Average Revenue C)Average Revenue is more than Marginal Revenue D)Marginal Revenue and Average Revenue are never equal

Answer 1

Explanation:

All producers are price takers and cannot influence the price. They simply accept the singular price determined in the market. Any variation in its output will have a negligible effect on the total supply and effectively the market price, that the effect can safely be assumed to be 0. The firm may choose to sell additional output at the same industry price and thus the marginal revenue (extra revenue earned) will always be equal to price.

Answer 2

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Pure or perfect competition is a theoretical market structure in which the following criteria are met: All firms sell an identical product (the product is a "commodity" or "homogeneous"). All firms are price takers (they cannot influence the market price of their product). Market share has no influence on prices!