Which of the following is characteristic of a purely competitive seller's demand curve? a. Price and marginal revenue are equal at all levels of output. b. Average revenue is less than price. c. Its elasticity coefficient is 1 at all levels of output. d. It is the same as the market demand curve.

Question

Cherish Ho

Business

15 October, 09:00

Which of the following is characteristic of a purely competitive seller's demand curve? a. Price and marginal revenue are equal at all levels of output. b. Average revenue is less than price. c. Its elasticity coefficient is 1 at all levels of output. d. It is the same as the market demand curve.

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Answers (1)

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Ben Juarez · Answer 1

a. Price and marginal revenue are equal at all levels of output.

Explanation:

Purely competitive seller price is the total revenue of the seller, which is equal to market price of product multiplied by total number of output. In free competitive market, In pure competitive market, seller see a perfect elastic demand, so they sells any quantity of goods at market price. Therefore, average revenue and marginal revenue are equal to the market price. In this case, seller cannot make more profit by minimizing cost as they have to sell the units of goods at market price, however, in short run they could maximize the profit by reducing the variable cost.